REITS will be greatly beneficial to the UK investment community - if given the chance
Posted: 06.02.2008
The regime must not be allowed to stagnate
Big global REITS are already strong in Europe– but will the UK be able to remain in the fast lane in the future?
According to Ian Marcus, Chairman, European Real Estate Investment Banking, Credit Suisse, and President of the British Property Federation, the answer is: Give UK REITS a chance to show they are the way forward.
Marcus was speaking at an authoritative breakfast meeting of the Cambridge University Land Society (CULS) recently.
His view was echoed by the chairman of the meeting, Douglas Blausten, senior partner at property consultants Cyril Leonard and Chairman of the CULS Global Economy Forum.
He said it was too early to tell whether REITS had been a success.
“I believe you can’t tell at the moment,” he said. “We don’t know when the property story is going to end. A major factor has been the changing real estate market over the last year. The market has been overheated and the present situation is an adjustment that was due to happen.”
REITS were heralded as a breakthrough in property investment when they were launched at the beginning of 2007 and have received an enormous amount of attention over the past 12 months.
The CULS breakfast was convened to examine how they have fared over the past year and what their future holds.
Marcus was joined by Francis Salway, Chief Executive, Land Securities plc. They are arguably the two most authoritative speakers on this very important subject which has changed the face of publicly quoted real estate companies in the UK.
Salway said that one year on REITS was becoming a part of what he called “the global REIT universe.”
The market share of the universe, he stated, showed that the UK was very well positioned.
“There is potential for listed companies to grow as a proportion of the UK property universe,” Salway said.
Around 150 senior figures from the British property industry attended and in addition to the two speakers, Elizabeth Peace, Chief Executive of the British Property Federation was present. She was one of the team instrumental in getting REITS introduced by the Government and was awarded a CBE in the New Year Honours list.
Professor John Glascock who was on the Government’s Advisory Board for REITS also attended.
Marcus told the audience: “Twelve months ago we patted ourselves on the back – that was after 20 years of trying to arrive at REITS.”
Now, he said, there had been greater internationalisation of property investment.
“Real estate has emerged as a mainstream global asset class,” he said. “Big global REITS are already in Europe and the UK.”
He listed REITS’ key benefits as:
- great diversification
- boosted returns
- liquidity
- performance over the short and long term
- transparency
Commenting, Blausten said that transparency had been a “great struggle” for the industry, but that REITS provided “great opportunities”.
Marcus added: “We have seen an industry revolution,” adding that since 1st January 2007 there had been:
- continued significant investment
- limited activity by new REITS
- continued falls in market value of UK REITS
- conversion of majority of existing major listed property companies to REITS
“Despite this,” he said, “REITS was an extremely positive step for the industry. We must now ensure that the REITS regime does not stagnate.”
According to Marcus, in future to ensure further growth of REITS there must be:
- the elimination, reduction or deferral of costs
- AIM listed REITS
- unlimited REITS
- reduction of vendor tax on capital gains
- a review ownership test
It is most disappointing that there has been no new residential REITS, he commented.
As to whether the UK will be in the fast lane in future, Marcus’s response was:
- We will see more
- There will be consolidation
- There will be more sophistication
- There will be greater transparency
“All will be beneficial to the investment community,” he said, adding: “This is the way forward – give them a chance to show it.”
Land Securities’ Salway pointed to the fact that there had been a massive increase in dividends.
“That’s worked,” he stated. “It has worked for major UK listed companies.”
After all he advised, “it’s a good idea to put yourself in the right spot.”
Looking to the future, Salway remarked: “We believe over time UK REITS will cover a high proportion of commercial real estate in the UK. It won’t change overnight, but it will over the next 5 years |
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Around 150 senior figures from the British property industry attended a recent Cambridge University Land Society Global Economy Forum discussion on how REITS have fared in their first year and what their future holds. Speakers were (left to right) Douglas
Douglas Blausten, senior partner at property consultants Cyril Leonard and Chairman of the Cambridge University Land Society Global Economy Forum, launches the recent CULS breakfast discussion on how REITS have fared in their first year and what their fut
At the recent CULS breakfast meeting on the future of REITS, Tom Butt, Investment Partner with Cyril Leonard, met up with Michael Elghanayan, Director of Epic UK Ltd.
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