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Why the UK may turn to Reits

The UK government has been in talks with members of the property industry for years about the potential of real estate investment trusts (Reits), a new tax-efficient way of investing in property. If the UK sanctioned a US model, Reits would not have to pay tax on their income as long as they distributed a high proportion of the cash – usually between 50% and 60% of revenues – to shareholders.

Reits offer a way of investing in property – potentially residential as well as commercial – through a securitized, typically closed-ended and entirely tax transparent vehicle that is capable of being listed on a stock exchange.

In his 2004 budget, Chancellor Gordon Brown announced the start of a consultation process on the possible introduction of Reits into the UK. Last March, the UK treasury unveiled a top-level consultation group to advise it on the final structure of Reits. The group includes John Gellatly, director of investment banking at Credit Suisse First Boston; Liz Peace, chief executive of the British Property Federation; Phil Nicklin of Deloitte; Ros Rowe at Price WaterhouseCoopers/Royal Institution of Chartered Surveyors; Simon Clark of Linklaters; Stephen Edge of Slaughter and May; and Lucinda Bell at British Land.

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