THE REIT STUFF FOR LAND­LORDS?

MIKE WHITE, MARTIN & CO

EDP Norfolk - - Promotiona­l Feature -

Given the re­lent­less squeez­ing of land­lords by HM gov­ern­ment I have con­cluded, in the past, that sell­ing their as­set was likely the only op­tion. How­ever, this has been bug­ging me; say­ing, ‘Just give up’ goes against the grain and I’ve been con­tem­plat­ing other ways around the is­sue.

Be­fore I elab­o­rate, I’m nei­ther a tax ad­vi­sor nor a fi­nan­cial ad­vi­sor in the reg­u­lated sense and what fol­lows are just my per­sonal mus­ings. None­the­less, one ve­hi­cle I think could work is a Real Es­tate In­vest­ment Trust. They’ve have been around in the UK since 2007. Ours are highly reg­u­lated com­pa­nies, set up to be tax ef­fi­cient own­ers of large prop­erty port­fo­lios. The own­ers of the Nor­wich Chapelfiel­d Shop­ping Cen­tre and the River­side Leisure Cen­tre are REITS.

The tax ef­fi­ciency comes from the fact they do not pay cap­i­tal gains or cor­po­ra­tion tax. Add to that REITs are legally bound to pay a min­i­mum of 90% of all prop­erty rental prof­its to share­hold­ers on an an­nual ba­sis and, by be­ing quoted on the stock ex­change, can of­fer liq­uid­ity, you’ve got an al­ter­na­tive worth con­sid­er­ing. For those land­lords who don’t have much of a buy to let mort­gage and/or are not higher rate tax-pay­ers, a REIT is un­likely to of­fer the same re­turns as own­ing your prop­erty. But for those who only have a choice of sell­ing or... what(?) a REIT could be the ‘or what’.

At this point you’ll be shout­ing, ‘that’s all very well but how do I get my prop­erty into one of these REITs with­out in­cur­ring a Cap­i­tal Gains Tax li­a­bil­ity?’ The an­swer to the ques­tion is to find a REIT which is will­ing to ex­change your prop­erty for shares. That’s po­ten­tially a risk as swap­ping bricks for pa­per has got to be but the ad­van­tage is, there would be no CGT li­a­bil­ity in­curred un­til the shares were sold at some fu­ture point.

There are a few res­i­den­tial REITs al­ready out there but I think the far more in­ter­est­ing play would be to put to­gether a Nor­folk based REIT for lo­cal in­vestors. It would prob­a­bly only need a to­tal of 500 prop­er­ties to make it work. Any­one in­ter­ested? Give me a call at Martin & Co and let’s see if it could be a goer!

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