The British Property Federation and the UK’s largest REITs are lobbying the government for changes to the REIT regulations ahead of the pre-budget report, to help businesses conserve cash in the downturn.
The BPF has written to the Treasury calling for an amendment to allow REITs to count their stock dividends towards their 90% income distribution requirements.
It says that this move would leave real estate firms better placed over the coming year – and BPF finance policy director Peter Cosmetatos has stressed that the change would not cost the Exchequer anything.
Currently, REITS are required to distribute 90% of their property income to investors in return for not paying corporation tax. They can offer shareholders the alternative of taking stock instead of a cash dividend, but this does not count towards the 90% distribution requirement, which must be in cash.
John Richards, vice-president of the BPF, said: “Refinancing by the REITs over the last year has shown strong confidence in the sector and many are now assessing opportunities for new investment. Allowing REITs to have greater flexibility over how they manage their cash will benefit our economy as we begin to see improvements in occupier demand.”
Peter Cosmetatos, BPF director for finance policy, said: “This change would allow REITs to manage their way through difficult times while maintaining shareholder value by giving shareholders the option of accepting cash or a stock dividend. We are of course acutely aware of the state of the public finances – but as tax would still be collected when the distribution is made, the Exchequer would not lose out under these proposals.”
Chris Grigg, chief executive of British Land, said: “REITs are obliged to pay out a higher proportion of profits in cash than other listed companies, so this straightforward amendment would level the playing field, have no downside to Government as tax paid would be the same, while giving REIT investors the choice of leaving cash efficiently in the business.”