European Valuation Standards 2008
At the invitation of the European Property Federation, several leading property related bodies met at Barcelona Meeting Point on 8 November 2006 to discuss how best to promote and support the development of an EU Real Estate Investment Trust (REIT).
Apart from the European Property Federation and representatives from the British, Danish, Finnish, Portuguese and Swedish Property Federations the other attendees included representatives of RICS Europe, TEGoVA, the European Banking Federation, the European Mortgage Federation and the European Landowners Organisation.
The representatives present agreed to pursue the idea of setting up a coalition to lobby EU institutions to create an EU REIT for European cross-border investment. The initiative comes at a time when the property investment scene in Europe is in a state of flux. Following the creation of French REITs three years ago, REITs are set to come on stream in the United Kingdom and Germany during 2007. There is now debate about the introduction of REITs in Italy and Spain as well.
A REIT may be defined as a corporation, which has to derive the majority of its income from property or assets or businesses related to property, pays no taxes at corporate level (albeit a majority of net earnings is paid out as dividends to shareholders who are then taxed), has the option - but not necessarily the obligation - of public listing and functions within a specific legislative framework and under supervision of authorities.
At an RICS "REITS" seminar at Barcelona Meeting Point earlier in the day, Guest Speaker, Michael MacBrien, Director General EPF, succinctly summed up the position as follows "As the property industry develops from a local business to a pan-European business, it has the potential to ensure that global funds for real estate investment and development can be spread across the EU. In this way, the industry can help the less cash-rich economies to build a modern infrastructure and move more towards the EU average, and ultimately better integration. Better quality property and infrastructure attracts business and has a multiplier effect on regional development. The key to achieving this is the Real Estate Investment Trust or REIT, a vehicle under which investment can be directed in a tax efficient manner into the real estate sector.
Whilst the REIT has now been adopted in several EU member states and is planned in several more, the lack of a pan-European property investment vehicle is handicapping the Union in many ways, in particular, by creating competitive distortions in the Internal Market as capital flows to REIT countries, by stunting the capacity of the property industry to develop on a European scale, by hurting small member states and their savers and by causing poor allocation of capital in the EU. The solution is a European legislative instrument setting the framework for an EU REIT. This builds on the welcome national initiatives already underway"