German lawmakers have approved the introduction of the G-REIT today – a long-awaited move which is expected to kick-start a raft of flotations over the coming 12 months.
As expected tenanted residential property has been excluded from the legislation although maximum of 49% of residential will be allowed in mixed-use buildings and developments.
DEGI, the property manager of insurer Allianz , said in a report that a quarter of the 150 companies listed in three of Germany's four top stock market indexes had indicated readiness to spin off properties into separate entities such as a REIT or a real estate fund.
The decision comes at a time when foreign investor interest in the German property market is at an all time high. Consumer confidence is growing as Germany’s employment market picks up and key office markets in Hamburg and Munich are showing early signs of recovery.
Patrick Sumner, head of property equities at Henderson Global Investors, said the G- REIT would broaden the European listed property sector further. He said the G-REIT would help speed the transfer of property from German corporate ownership and open the way for institutional investors to restructure their portfolios and provide an exit for the open-ended and closed-ended funds.
‘The initial rules do seem unnecessarily restrictive but our experience of the French SIIC regime and the UK’s newly introduced REIT rules is that once legislators get comfortable with REITs and the tax benefits which they bring – both in terms of exit taxes and ongoing revenues from withholding taxes – they seem to be happy to work with the property industry to liberalise the rules.’