Ireland To FacilitateReal Estate Investment TrustsIn 2013 Finance Bill
Property Industry Welcomes Proposed REIT Structure and Conditions
Last week the Irish government published a draft of its 2013Finance Bill, set to become law in early April 2013, which amongst other measures containsprovisions enabling for the first time the formation of Irish real estate investment trust companies. These REITs will be regarded as Irish companies incorporated under the Irish Companies Acts but, in keeping with REITs in the UK, the US and elsewhere, will not be liable to corporate incometax on income and capital gains flowing from property rentals, provided certain conditions are met.
The conditions detailed in the bill include the requirements that the company must be tax resident in Ireland and nowhere else, thatits shares must be listed on the main market of a stock exchange in anEU state,and that it must not be a closed company. As regards the operations of areal estate investment trust, at least 75 percent of aggregate income mustderive from a property rental business;the REIT'sportfolio must include at least three properties,none of whose market value can be more than 40 percent of the total holdings, and the REIT must maintain a property financing cost ratio of at least 1.25:1 (the ratio of rental income to financing costs).
According to Irishtimes.com,Ireland's property industryhas been generallywelcoming in its stance towardthe draft REIT legislation. A number of prominent figures in the sector have expressed satisfaction that the legislation seems to tick all the boxes needed to enable the development of a real estate investment trust industry in Ireland.
John Moran, secretary general of the Department of Finance, articulated the government's ambition to make Ireland an international centre for REITs,in the same way that Dublin is now an international base for aircraft leasing. According to the European Public Real Estate Association (EPRA), the potential for REIT investment in the Irish market could be in the order of€5 billion (£4.36 billion) within five years, well up on anearlier estimate byNCB Group of a market in three to five years somewhere north of €2.5 billion (£2.18 billion). It's generally agreed though that the biggest challenge will lie inattracting international investors to Irish real estate investment trust companies. Irishtimes.com writes that the country has historically had virtually no long-term foreign investmentin property,withthe country's now well and truly burst real estate bubble financed almost exclusively by the heavy domestic and international borrowings of Irish banks.
The ERPA will be monitoring and reporting on the level of performance and quality of governance of Irish REITs so as to ensurean objective reference point for foreign investors considering a play inthe newly created Irish REITs market.
Last week the Irish government published a draft of its 2013Finance Bill, set to become law in early April 2013, which amongst other measures containsprovisions enabling for the first time the formation of Irish real estate investment trust companies. These REITs will be regarded as Irish companies incorporated under the Irish Companies Acts but, in keeping with REITs in the UK, the US and elsewhere, will not be liable to corporate incometax on income and capital gains flowing from property rentals, provided certain conditions are met.
The conditions detailed in the bill include the requirements that the company must be tax resident in Ireland and nowhere else, thatits shares must be listed on the main market of a stock exchange in anEU state,and that it must not be a closed company. As regards the operations of areal estate investment trust, at least 75 percent of aggregate income mustderive from a property rental business;the REIT'sportfolio must include at least three properties,none of whose market value can be more than 40 percent of the total holdings, and the REIT must maintain a property financing cost ratio of at least 1.25:1 (the ratio of rental income to financing costs).
According to Irishtimes.com,Ireland's property industryhas been generallywelcoming in its stance towardthe draft REIT legislation. A number of prominent figures in the sector have expressed satisfaction that the legislation seems to tick all the boxes needed to enable the development of a real estate investment trust industry in Ireland.
John Moran, secretary general of the Department of Finance, articulated the government's ambition to make Ireland an international centre for REITs,in the same way that Dublin is now an international base for aircraft leasing. According to the European Public Real Estate Association (EPRA), the potential for REIT investment in the Irish market could be in the order of€5 billion (£4.36 billion) within five years, well up on anearlier estimate byNCB Group of a market in three to five years somewhere north of €2.5 billion (£2.18 billion). It's generally agreed though that the biggest challenge will lie inattracting international investors to Irish real estate investment trust companies. Irishtimes.com writes that the country has historically had virtually no long-term foreign investmentin property,withthe country's now well and truly burst real estate bubble financed almost exclusively by the heavy domestic and international borrowings of Irish banks.
The ERPA will be monitoring and reporting on the level of performance and quality of governance of Irish REITs so as to ensurean objective reference point for foreign investors considering a play inthe newly created Irish REITs market.
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