Real Estate Investment Trusts (REITs)

Under  legislation introduced in 2007, UK property companies which comply with the appropriate requirements can become  REITs, which gives them exemption from UK corporation tax and capital gains tax provided that they distribute at least 90% of exempt income as dividends.   In other words, REITs are like investment trusts (see Collective Investments) which own a spread of properties instead of a spread of shares in other companies,  and they are of interest  to individual investors who are seeking an investment in property as an alternative to investment in equities and bonds.   There are currently 14 REITs listed, with a total market capitalisation around £40 billion.  

Although they are new in UK, REITs are not uncommon in other markets, and because of their  tax attractions it is quite usual for them to be traded at a price materially in excess of their net asset value.   After an initial burst of enthusiasm REITs in UK have tended to trade at a discount to their net asset value - which may or may not be their pattern for the future!

See:

http://www.hm-treasury.gov.uk/media/A61/AB/Bud05Reits.pdf    This is the 2005 Dicsussion Paper on REITs published by HM Treasury

For a stockbrokers view on the investment merits of REITs see http://www.stockbrokers.barclays.co.uk/?category=whatweoffer&usecase=landing103&WT.srch=1