REITs have arrived at last and already British Land, Hammerson and Slough Estates have received approval to convert to REIT status.

The four separate sets of regulations governing the REIT regime were published together on 1st November and the only major change from what was expected is that the 10% limit on shareholdings is now limited to corporate entities and does not apply to holdings held by individuals.

A perceived difficulty has been removed in the Pre-Budget Report. The requirement that the company must contain at least 3 properties when the application to become a REIT is made has been removed as it was recognised as a considerable obstacle to the establishment of new REITs from scratch. This condition must now be satisfied by the end of the first accounting period and the entry charge of 2% will be levied on the value of the assets in the fund at that time.

Another difficulty which remains is that a REIT must be listed on a recognised stock exchange. An AIM listing is not “recognised” for these purposes and early new REITs might be listed in Ireland or Holland. The reason for this is that the UK Listing Conditions are more onerous than the REIT conditions, making a listing of a new fund or currently unquoted property company on the UK stock exchange difficult.

Partially to counter this, the UK Listing Conditions are being changed, but these will not be issued for consultation until early 2007 and will not be implemented until the third quarter of 2007 at least. In the meantime, the UK Listing Authority has said that it will look favourably on applications for waiver from existing conditions if REITs find them difficult to comply with.