 Changes to REITs to boost UK property sector
6 December 2011: Welcoming the Government’s draft legislation on changes to real estate investment trusts (REITs), PKF Accountants & business advisers urges small and mid-sized property companies to take another look at REITs as a viable business vehicle.
James Welch, tax partner at PKF, comments: "Today’s draft legislation ticks all the boxes, opening up REITs to a much wider group of providers and offers a more diverse market for investors."
"The changes from April 2012 will make converting to REIT status much easier and more attractive. Removing the current 2% conversion charge, allowing REITs to be listed on the AIM and PLUS exchanges or overseas, and allowing cash to be classed as a ‘good asset’ will certainly encourage more businesses to consider adopting REIT status."
"The changes to the current exclusions for close companies will be particularly good news for investment managers and institutional investors. The draft rules specifically allow unit trusts, open-ended investment companies, pension schemes and insurance companies to manage their own REITs. Their investment experience should considerably increase competition in this market and I expect to see such providers teaming up with property experts to launch new REITs focusing on the residential property sector."
"Allowing a three-year grace period for converting companies to meet the ‘non-close’ company rule should also make it much easier for medium-sized businesses to split out their property investment operations and convert them into smaller REITs. The option of restructuring in this way relatively quickly could be especially attractive to property businesses under pressure in the current economic climate."
"Overall, this legislation may help to kick start developments in the UK property market. A depressed property market offers some great opportunities to those who have the capital to act quickly – setting up a new REIT could be the ideal way to secure that funding."
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For further information, please contact: Andy Konieczko, 020 7065 0537, andrew.konieczko@uk.pkf.com
Notes to Editors:
1. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Guernsey) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member firm of the PKF International Limited (PKFI) network of legally independent member firms. The PKFI member firms have around 2,200 partners and more than 21,000 staff in around 125 countries.
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