German companies seeking to convert to a real estate investment trust could consider merging with existing REITs if they fail to meet the deadline for full conversion at the end of 2012, according to Frank Schaich, CEO of Fair Value REIT.
Schaich told PropertyEU at Expo Real that this option would also help tackle the under-representation of REITs in the German market compared to the UK and France. ‘REITS are the investment scheme of the future, offering a highly efficient way to invest in the German real estate. The sector is too small and the solution needs to come from within Germany.’
Four companies have so far become REITs in Germany. However, a similar number that acquired property using the tax-transparent REIT process have not moved beyond pre-REIT status due to the inability to IPO in the current volatile stockmarket climate. Unless the German parliament extends the deadline for conversion for another 12 months, companies could face decision time at the end of 2012, Schaich pointed out.
Fair Value invests in office and retail property in regional German cities. The company’s portfolio is valued at EUR 225 mln but the market capitalisation is just EUR 40 mln. Schaich acknowledged that Fair Value is a ‘micro-cap’ but said it had ambitions to grow.
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