ZIA, Germany's central association for real estate organisations, has hit out at plans by the German stock exchange to mandatorily remove IVG Immobilien and other property companies that intend to convert to real estate investment trust (REIT) status from the main DAX indices and place them in a separate index.
ZIA, Germany's central association for real estate organisations, has hit out at plans by the German stock exchange to mandatorily remove IVG Immobilien and other property companies that intend to convert to real estate investment trust (REIT) status from the main DAX indices and place them in a separate index.
Both Germany and the UK are set to introduce REIT legislation early next year that will allow property companies to pay far less tax on condition they distribute most of their earnings in dividend to shareholders. Near neighbours France, the Netherlands and Belgium, already have REIT-like systems. REITs were first created in the US in the 1960s. The country remains the largest market with 190 trusts and at least 19 REIT indices, the IHT newspaper reported.
Deutsche Borse, which operates Frankfurt stock exchange, and FTSE International, which operates British stock indices for London Stock Exchange, announced earlier this week that they intend to set up separate REIT indices to make it easier for investors to track the stocks.
In Germany's case, Deutshe Borse intends to create two indices, one for the largest companies and a second broader index. 'The risk-return profile of REITs is different,' Borse spokesperson Frank Herkenhoff told the IHT. 'They need to have a segment of their own'.
This means that future REITs such as IVG Immobilien, the largest German real estate company, will be summarily removed from the main indices followed by analysts and fund managers. Unlike the UK, Germany does not have an existing real estate index.
Dr. Eckart John von Freyend, chairman of the ZIA welcomed the fact that Deutche Borse was tackling the issue of REITS. However he said making it mandatory for REITS to drop out of the main DAX indices would clearly diminish the attractiveness of the new investment vehicles. As Germany and the UK already expect their REIT regimes will compete for investors, ZIA is worried that the index plans could put German companies at a serious disadvantage.