REAL ESTATE – Over a quarter (27%) of quoted German corporates had concrete plans to sell their property holdings to create real estate investment trusts (REITs), according to a study by German real estate fund firm DEGI.
Legalisation of German REITs – tax-privileged and listed companies that deal in real estate – is expected by the end of the current quarter.
The DEGI study also reflected that another third of quoted German firms were "willing" to sell their properties to REITs soon, while another 17% were thinking of doing so sometime in the future.
For its study, DEGI queried 130 firms listed on Germany’s blue-chip DAX, mid-cap MDAX and small-cap SDAX indices.
Industry experts believe that by 2010, German REITs could become a €50bn market, partly because of a willingness among German firms to divest their property holdings.
Thomas Beyerle, director of research and strategy at DEGI commented: "Of all commercial properties, 73% are owned by German companies. This is very high by international standards."
"But increasing competition, more flexible production processes and new rules regarding lending (Basel II) will prompt companies to reduce non-strategic property holdings," he said.
Beyerle also noted that the firms’ ability to sell their properties to REITs could be somewhat hampered by the properties themselves. "The architecture and furnishing of some properties is very much geared to the original owner. This could mean very cost-intensive remodelling and as a result of that less rental space," he added.