Property trusts build up in number after rules change

The number of real estate investment trusts in Britain has more than doubled in the past five years, as looser rules unleash a wave of new money into the sector.
There were 80 Reits in the 2019-20 tax year, data released under a freedom of information request showed. This has risen to 163 as of July this year, HM Revenue & Customs said.
There were 45 new Reits registered in the tax year that ended in April, the request submitted for Lubbock Fine, an accounting firm, revealed. That marked a 61 per cent rise from the year before, when only 28 were registered, and more than double the number registered in the 2021-22 tax year.
The rising number of new Reits comes after various changes to registration rules in the sector, including the removal of the requirement for a Reit to list on a stock market. This reduces financial and administrative burdens such as admission fees and reporting obligations.
The growing popularity of Reits as an investment structure is also partly thanks to significant tax advantages. Unlike a conventional property company, Reits are exempt from corporation tax on profits from rental income. The new rules are also more relaxed about overseas investment, with more companies now eligible to be considered a Reit equivalent, encouraging more foreign funds to convert to Reits.
Neil Williams, a partner at Lubbock Fine, said: “The removal of the listing requirement is already producing huge cost savings. A lot of new money is being injected into Reits, while at the same time a lot of existing commercial property investment is being converted into Reit structures. Many of the new Reits are existing investment funds converting and using the tax advantages to pass on more value to investors and increase the rate of return.”
Segro is London’s biggest listed Reit by market capitalisation, which stands at £11.6 billion. There has been a wave of consolidation on the upper end of the British commercial property market as landlords vie to attract investment from big institutions and investment funds. LondonMetric and LXi Reit agreed to a £1.9 billion all-share merger this year, while Custodian Property Income Reit and Abrdn Property Income Trust also combined. Last year Shaftesbury and Capital & Counties, which together own 40 acres of London’s West End, worth about £5 billion, joined up to form Shaftesbury Capital.