The Irish Minister for Finance has announced in his Budget speech of December 5th 2012 that new legislation to provide for Real Estate Investment Trusts (“REITs”) will be enacted in Ireland shortly. The Minister stated:
“In order to attract new investment, I will provide for the establishment of Real Estate Investment Trusts, which allow for investors to finance property investment in a risk diversified manner.”
It can be noted that Ireland, unlike the US, Germany and the UK, has not had a specific REIT regime to date. Accordingly, collective investment in Irish property has typically been structured through unregulated limited partnership structures established under the Limited Partnerships Act 1906, or else through collective investment schemes authorised by the Central Bank of Ireland, typically approved as non-UCITS Qualifying Investor Funds (QIFs). Further details regarding such structures are available in this Guide.
While the details of the Irish REIT regime remain to be clarified until the release of the Finance Bill in early February 2013, the annex to the Budget speech does give further outline information on what is proposed and as a result it seems likely that the requirements applicable to REITs in the UK will generally also be applicable to the new Irish structure. These include:
- a requirement for the vehicle to be listed and adhere to Stock Exchange listing rules;
- to be widely held (maximum of 10% owned by any one investor);
- to be subject to borrowing restrictions and risk diversification requirements;
- an obligation to distribute a substantial percentage of income to investors on an annual basis; and
- being tax neutral vehicles.
Given the conditions generally applicable to REITs, including those set out above, while this new structure should encourage investment in property by facilitating investment from investors seeking income yielding investments, in many cases the existing regulated and unregulated structures will continue to be the most suitable vehicles for investments in property which do not fit the profile for a REIT. For example, investments in development land or where other applicable conditions cannot, or are not proposed to be, met such as the limitation on leverage.