Industry backs calls on UK government for UK debt REITs
Senior industry figures have encouraged the UK Government to announce a consultation on the introduction of mortgage REITs in Wednesday’s Budget.
Robert Fourt, Partner and Head of Investment Research at Gerald Eve said: “Given the debt mountain that still persists in the UK and is coming to a peak in the next few years, the introduction of mortgage REITs would be a very welcome friend to the property sector in the UK.
“Having a liquid property debt market is crucial, particularly in respect of property development financing, and Mortgage REIT’s could play a significant role in enabling that, by freeing up capital, through managing out distressed debt in a more effective way.”
Phil Nicklin, Real Estate Tax Partner at Deloitte and a lead adviser to the government on REITs since they were introduced in 2007, believes there’s a good chance that a consultation document could be published about the introduction of mortgage REITs
“Mortgage REITs are well developed in the US,” said Nicklin. “If introduced to the UK, they could take on existing bank loans, freeing up lending capacity and potentially providing a new source of capital to the mortgage market.”
In the US there are 27 mortgage REITs, with a combined market value of around US $30 billion.
Robert Moir, REITs specialist and Corporate Partner at Pinsent Masons added: “As well as demand for private non-listed REITs to encourage investment into property and regeneration, the market has also been calling for debt REITs to unlock underlying property assets via the banking sector.
“A consultation would be very welcome in the industry, both by investors and banks. As well as the benefits for the property sector, this would help bank balance sheets and free up funds for more lending to SMEs, a key political priority at the moment”.
Life insurer, Liberty Holdings Ltd (JSE:LBH), which co-owns the vibrant Sandton City with Pareto Limited, says it plans to list part of its property assets on the JSE as a Real Estate Investment Trust (REIT) by end of this year. ... Full story