REITS a Big Bang for Investment Marketing or a Damp Squib?

Felix Thomson

Content Executive

The Financial Services Forum

Andrew Porter takes a look at the new entrant to the financial services investment market and questions whether property companies are taking investors seriously.
• Since January 2007 UK-listed property companies have been converting to new REIT status, and triggering a wave of interest in commercial property investment.
• Success will depend on take up from retail investors, who are typically underexposed to the sector.                                                                                                                                                                                         • Significant market education will be necessary to unlock this demand, but REIT property companies seem content to delegate the task to fund managers and financial advisers.
• Asset management companies are launching new property funds.
• The launch of Reita, a central hub of knowledge and information is also a useful initiative.
• But will it be enough to herald a new asset class for private investors ?
The REITs opportunity
REITs (Real Estate Investment Trusts) are designed to offer investors tax-efficient income and capital growth from rented property – commercial or residential – with a return closely aligned with direct property investment.
This is achieved by taking away the ‘double taxation’ (corporation tax and capital gains tax, plus tax on dividends) that drags down the share prices of ordinary quoted property companies and historically has caused them to trade at a discount to their underlying asset values.
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