Your exchange of choice for UK REITs in 2018 is…
Friday, 12 Oct 2018
Fiona Le Poidevin, CEO of The International Stock Exchange Group (TISEG), looks at the data and finds that The International Stock Exchange (TISE) has been the listing venue of choice for UK Real Estate Investment Trusts (REITs) so far in 2018.
Speaking at the Urban Land Institute (ULI) UK REIT Seminar at the end of September provided an opportunity for me to take a look back at recent trends in the listing of HMRC approved UK REITs.
What the data revealed was that there have been more UK REITs listed on TISE than the London Stock Exchange (LSE) in the year to the end of the third quarter. There have been five REITs newly listed on TISE, whereas there have been two newly added to the LSE. What is more, the total equity issuances of the five new REITs listed on TISE considerably outstrips the amount raised by the two new REITs on the LSE.
The addition of the new REITs means that TISE has again grown its market share from just over a quarter to nearly a third. The majority of REITs are on the LSE and as such, it is no surprise that the amount raised by further issues on the LSE was £1.5bn in the year to the end of September, which is three times as large as the further issues of REITs listed on TISE. However, the total equity issuance during 2018 of REITs listed on TISE is greater than that of those listed on the LSE.
These trends result from that the fact that in the last few years a series of factors have come together to drive up interest in UK real estate as an asset class (low interest rate environment and currency changes post-Brexit vote) and the REIT as a vehicle for that investment (changes to the REIT regime, the shift from open ended to closed ended structures for property and UK tax measures regarding property ownership).
“TISE has again grown its market share from just over a quarter to nearly a third.”
This combines with the UK REIT regime requiring that a vehicle is admitted to trading on a recognised stock exchange and either: listed on such an exchange; or traded on such an exchange in every accounting period. TISE is deemed a recognised stock exchange and listing venue by HMRC under section 1005 of the Income Tax Act (2007). It is this same recognition which also enables investment into TISE-listed products by Self-Invested Personal Pensions (SIPPs) and Individual Savings Accounts (ISAs).
TISE has become the alternative listing venue because of its cost-effective and pragmatic admissions process as compared to major exchanges. Similar to the UK REIT regime itself, our rules specifically exempt REITs from the free-float rule requiring 25% of the issued share capital to be held in public hands.
“Total equity issuance during 2018 of REITs listed on TISE is greater than that of those listed on the LSE.”
This has proved particularly attractive for those REITs where there are a smaller number of increasingly international institutional investors (investing on behalf of a large number of beneficial owners) and especially, where they are likely to hold for the long term and therefore do not require significant levels of liquidity. Having said that, there has been a recent trend towards TISE also proving attractive to more widely held REITs, such as ‘club’ deals of high net worth individuals, and those who want the option to trade through our bespoke trading system.
While UK REITs must be tax resident in the UK, they can be incorporated in other jurisdictions. TISE-listed REITs include England & Wales companies and those established in Luxembourg and the Channel Islands.
Using Guernsey, Jersey or Isle of Man incorporated companies to avail of the UK REIT regime has some advantages compared to a UK equivalent. These include modern company law enabling distributions to be made on a cash flow solvency basis and there being no stamp duty payable on the transfer of shares.
There were 539 new listings on TISE during the first nine months of 2018, which was an increase of nearly 19% on the previous year and took the total number of listed securities to 2,674 at the end of September 2018.
These listings include debt being issued by groups investing into property and infrastructure, including renewable energy projects. In addition, there are more than 350 securities issued by investment vehicles across a variety of asset classes, including real estate. There has been a continued increase in these vehicles being admitted to TISE, which is now recognised as the alternative listing venue for REITs.
An original version of this article appeared in Property Funds World, October 2018.
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