Insights series / 06 September 2021
3 reasons investors prefer to use REITs for UK property investments
Having come into effect on 1 January 2007, the UK Real Estate Investment Trusts (REITs) regime has evolved to the point where there are now almost 100 UK REITs that own around $141bn (£100bn) of property investments.
But what are the benefits of REITs?
Crestbridge executives joined Ashurst and Cushman & Wakefield on June 10th 2021 for a lively discussion of these points and more. Ana Kekovska was joined by Dean Hodcroft and Simon Todd for the video discussion which took place live and with an audience in attendance.
1. REITs have magentic brand-value
Brand power is selling power, and REITs are one of the most recognisable fund structure names in property investments. Many jurisdictions the world over operate some form of REIT or REIT-like regime that asset managers are able to take advantage of. The brand has become so recognisable that the structure is understood and welcomed by analysts and investors from around the world.
According to Ana Kekovska, “institutional investors like investing in a REIT structure, with pension and sovereign funds in particular using the private REIT structure as their route to UK property investing.” Ana continued that managers who choose to convert to a REIT often attract new sources of investment.
2. REITs are globally recognised as tax efficient structures
REITs have a good reputation amongst the international investment community when it comes to tax efficiency for real estate investments. This is because REIT status can reduce or entirely eliminate any discount to net asset value caused by latent capital gains and in a tight real estate market, every advantage counts. REITs have a staggering advantage over non-REIT bidders as they’re able to bid for assets in a tax-exempt environment.
3. Onshore management
With continued negative reputational pressure on institutional investors from their scheme members or in the case of endowments, from student bodies, there are now more reasons beyond the BEPS programme to request onshore management. REIT structures offer an HMRC-approved, low risk and stable platform for investors of all types.
There are many more reasons investors prefer REIT structures for their UK property investments.
The full article on the topic gives three more reasons why investors prefer this structure, whilst also covering how managers can obtain and keep REIT status and if REITs can be a force for good in the move towards sustainable investing.
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