REITs

After paying a conversion fee, a REIT escapes corporation tax. It must pay out 90% of its property income to shareholders.

What type of investment is it?

It is an investment through buying shares in a listed property company that has elected for REIT status and operates in accordance with REIT regulations. The REIT regulations are intended to ensure the company is primarily engaged in property investment, rather than in development or other non-property related activities.

Most UK REITs focus on the UK, though a few have European investments. This sort of specialisation is a global characteristic of REITs, and reflects the diversity of legislation in some countries.

The major UK REITs are also many times larger than most property unit trusts, and are very transparent, as they are subject to continual market scrutiny. As REITs are all listed property companies, investments in them are generally very liquid.

Factors to be aware of

Shares in listed property companies are significantly more volatile than direct property investments or unit trusts, and perform more like equities than property. However, in the long-term, their performance is more closely correlated with property than equities.

Recent performance has been much poorer than for direct property, and shares in REITs have also continued to trade at a discount to Net Asset Value, despite the removal of the tax inefficiencies that were a major explanation for the discount.

Tax issues

The tax issues include the fact that dividends from REITs are treated as income to the investor, and are taxed accordingly.

Distributions are subject to a withholding tax at basic rate income tax, except for certain classes of investors who can register to receive gross rather than net payments. These include charities, UK companies, and pension funds. REITs can also be held in ISAs and Child Trust Funds (CTFs), and the managers of these can receive gross distributions, making these highly tax efficient.

To get more information on individual REITs visit our REITs company information table.

2007

1 January 2007 – Launch of UK REITs

Eight UK REITs are launched:

British Land
Brixton
Great Portland Estates
Hammerson
Land Securities
Liberty International (now Capital Shopping Centres Group Ltd)
Primary Health Properties
Slough Estates (now SEGRO)
Workspace Group

15 January 2007
Big Yellow converts to a REIT

1 April 2007
Shaftesbury plc converts to a REIT
Warner Estate Holdings converts to a REIT

2 April 2007
Slough Estates changes its name to SEGRO

11 May 2007
London Shopping REIT launches as the first newly created REIT

1 July 2007
Derwent London converts to a REIT
Mucklow (A & J) Group plc converts to a REIT

1 October 2007
Town Centre Securities plc converts to a REIT

2008

1 January 2008

Rugby Estates converts to REIT

1 April 2008
Highcroft Investments converts to a REIT
McKay Securities converts to a REIT

23 June 2008
Pineapple Corporation launches a REIT (on the Luxembourg stock exchange)

2009

1 February 2009
Glenstone Property Group converts to a REIT (on the Channel Islands stock exchange)

25 August 2009
Brixton is taken over by SEGRO – and therefore ceases to exist as a REIT

6 October 2009
Hansteen converts to a REIT

2010

24 March 2010 

Metric Property Investments launches as REIT

7 May 2010
Liberty International is now called Capital Shopping Centres Group, following a demerger

15 June 2010
Rugby REIT is bought by IRET Securities Ltd and therefore ceases to exist as a REIT

1 October 2010
London & Stamford joins the main market as a UK REIT

NewRiver Retail joins the main market as a UK REIT

2011

03 August 2011
ApexHi Property Fund Ltd admitted to the Official List of the Channel Islands Stock Exchange