PRIVATE REITS IN GERMANY

Tobias Pfeffer and Patrick Schlump

ERES from European Real Estate Society (ERES)

Abstract: The early elections in Germany last fall have postponed the decision process regarding the introduction of G-REITs. The leading lobbyist (IFD) has presented a bill, outlining a detailed framework of a possible G-REIT structure. This bill requires a mandatory listing in order to obtain the full scale of benefits attached to a REIT, i.e. tax-transparency. The big coalition, however, is still in dispute about the actual design. Other successful REIT regimes have provided for unlisted REITs, so-called private REITs. Especially insurance companies, that match their investments to long term liabilities and are not eager to participate in short term stock price volatility may be in favor of a private REIT. In addition, many possible REIT candidates have to consolidate and restructure their portfolios in order to transform into a successful REIT. This paper analyses existing private REIT structures from successful regimes, such as USA, Netherlands, Australia and considers the suitability of such a product for Germany. Furthermore, the capital market requirements for IPOs are examined to display the short comings of existing portfolios in Germany and argue against the sole introduction of public REITs. Besides a comparison of volatility of public and private REITs in selected regimes, an analysis of capital market requirements applying to real estate is conducted. As a result, the necessity of a parallel introduction of public and private REITs is shown to satisfy the demands of certain institutional investors and of the capital markets, which seems necessary to create a product that fosters the German property investment market and provides a competitive structure in an international context.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2006-01-01
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