Home Knowledge Introduction of Real Estate Investment Trusts Expected to Fuel International Investment in Ireland

Introduction of Real Estate Investment Trusts Expected to Fuel International Investment in Ireland

March 21, 2013

Guests at a William Fry breakfast briefing heard this morning how the introduction of Real Estate Investment Trusts (REITs) to Ireland will result in a growth in international investment in property here.  

Over 100 representatives from Ireland’s Fund, Property, Banking, Tax and Finance sectors were briefed on the main features of the proposed REITs legislation as well as the similarities between the current UK regime, set up in 2007 and the system proposed for Ireland.  Paul Murray of William Fry said the REITs brand is already well established across the world as a structure allowing tax efficient investment in property with greater liquidity than direct investment. 

Paul Murray noted that, “subject to meeting certain criteria, a REIT will not be liable to either Corporation/Income Tax on its property rental income or property profits, or Capital Gains Tax on disposals of assets of its property rental business.”

He added that, “the key drivers for the introduction of REIT legislation in Ireland are to attract capital to the built environment, to rebalance the level of debt/equity in the property sector and to achieve a diversification of economic interest in property assets.”  

The legislation requires  that a REIT must be a company incorporated and tax resident in Ireland, at least 75% of the aggregate income of the REIT must derive from property rental business, the property rental business must be comprised of at least three properties, and no one property can represent more than 40% of the total market value of the properties involved in the property rental business and at least 85% of the property rental income (excluding capital gains) for each accounting period must be distributed to shareholders on or before the REIT’s normal filing date.’

Chris Luck from Nabarro commented “It is widely expected that the Irish REITs regime will closely resemble that of the UK which was established in 2007.  The UK REIT market has seen impressive growth and has attracted international interest from a variety of sectors.  REITs have proved instrumental in growing the UK property market and introducing a new source of investment to the country as well as providing a return to Revenue.  With this in mind, it is imperative that legislation here allows for the formation of REITs so that Ireland may leverage its unique situation in the property market and attracts capital from overseas investors who are looking at Ireland through new, and positive, eyes.”

Brian Ross of Davy told attendees that Ireland is in a stronger position to attract investment in REITs than anytime over the last year. “The attitude of international investors towards Ireland has changed significantly over the past 12 months with many of them now keen to invest in our recovering market. The depth of investor demand is now being seen across a range of asset classes from bonds to equities to real estate. Once in place, REITs in Ireland can expect to attract demand from a wide range of domestic and international capital providers, including managed funds, pension funds, sovereign wealth funds, hedge funds and retail investors.”