REAL ESTATE – German property firm IVG Immobilien has lambasted the government legislation creating German real estate investment trusts (G-REITs), saying that unless it is improved, G-REITs will not be successful.
Germany’s parliament is due to approve the legislation this quarter. Once that happens, German REITs will be legalised retroactively from January 1. The legislation has already been criticised by Germany’s real estate industry for excluding residential property.
Now IVG chief executive Wolfhard Leichnitz said the law has other major flaws, including double-taxation of shareholders in certain circumstances and restrictions on tax breaks related to creating G-REITs.
"Only if these flaws are corrected will REITs be a success in Germany’s capital market," Leichnitz told the Börsen-Zeitung in an interview.
Detailing his criticisms, Leichnitz noted that investors in G-REITs faced double taxation – not only on earnings from domestic property but also from those realised from foreign property or REIT service companies.
Leichnitz also found fault with the ‘exit tax’ – a tax break related to creating G-REITs from existing property holdings. Those that sell property holdings to create G-REITs must have owned their properties for 10 years to qualify for the tax break.
"This requirement must be reduced to two years. Otherwise, there will simply be not enough properties to create REITs from," Leichnitz told the newspaper. He added that listed real estate securities like IVG, Germany’s biggest, should automatically qualify for the exit tax.
Finally, Leichnitz said his firm would sell €600m worth of properties in Madrid, Lisbon and Milan, as it was already well represented in those markets.
On the other hand, Leichnitz said IVG would maintain properties in Germany, London, Helsinki, Paris and Brussels. IVG was even considering bidding for the ‘gherkin’ skyscraper in London. currently owned by Swiss Re, he added.
In a separate development, Deka said it had appointed a new chief executive for Deka Immobilien Investment (DII), Germany’s largest provider of open-ended real estate funds.
Deka said Franz Mörsdorf had taken over as DII CEO from Reinhardt Gennies, who abruptly quit on December 31. Mörsdorf joins DII from Aurelis Real Estate Management, a joint venture involving railway operator Deutsche Bahn and German Landesbank WestLB.
Having joined DII in June 2005, Gennies was given the chief task of turning the firm’s fortunes around after a terrible 2004. By last autumn, or three years ahead of schedule, Gennies had fully restructured DII’s core German fund and improved the performance of its European and global property funds.