Capital & Regional has said that it is considering placing almost ÃÂ£3bn of property into new tax-transparent investment vehicles similar to the US REITs. Chief Executive, Martin Barber, said that the company would consider converting three large property investment funds that C&R manages on behalf of institutional investors, into a REIT-style vehicle, subject to shareholder approval.
The Chancellor of the Exchequer, Gordon Brown, is today expected to announce in his pre-Budget report a formal consultation process that would pave the way for the introduction of UK REITs by 2005-06.
As part of the consultation process, the government will work out the finer details of how a REIT-esque vehicle would be structured. Usually, however, they are exempt from capital gains tax and tax on property rental income in return for which most of their earnings are distributed in the form of dividends, on which investors are then taxed. They are also taxed on the increase in the value of their units in the property trust.
The Treasury believes such a vehicle would help boost institutional investment in private rented housing and affordable housing, as well as providing a safer way for private individuals to invest in commercial and residential property.
British Land is also understood to be interested in spinning off its Broadgate office development into a REIT-style vehicle, while Liberty International could do the same with some of its shopping centre developments.