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New REITs will boost Irish property

Thursday, March 21 15:20:37

The introduction of Real Estate Investment Trusts (REITs) to Ireland will result in a growth in international investment in property here.

Andrew Muckian, Partner and Head of Commercial Property at William Fry told a Breakfast Briefing today that, whilst Ireland had traditionally experienced low levels of overseas investment in the property sector, the introduction of REITs offers a new vehicle for investment that will contribute to a return to a stable and strong sector.

This is likely to be particularly so in commercial property in the Greater Dublin area, he said.

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 sets out the criteria for setting up and running a REIT.

It requires that a REIT must be a company incorporated and tax resident in Ireland. At least 75pc 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 40pc of the total market value of the properties involved in the property rental business and at least 85pc 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 said that 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."