EPRA has voiced alarm at an unexpected proposal by Germany’s Federal Financial Supervisory Authority to include domestic REITs within the scope of the EU’s Alternative Investment Fund Managers Directive.
EPRA has voiced alarm at an unexpected proposal by Germany’s Federal Financial Supervisory Authority to include domestic REITs within the scope of the EU’s Alternative Investment Fund Managers Directive.
The Federal Financial regulator BaFin invited interested stakeholders to submit their views on the AIFMD by an April 12 deadline.
The AIFMD is a European Union regulation which brings investment funds under the supervision of an EU regulatory body. According to EPRA, the European Public Real Estate Association, the potential classification of the G-REITs as part of the fund sector is 'of most concern' and would be 'detrimental to the future growth of the sector'.
'To reclassify the G-REITs as funds is not only the wrong conclusion and contrary to the objectives of the AIFMD, but would, if implemented, be detrimental to the future growth of the German listed property sector and the efficiency of the broader domestic real estate industry and so too its critical role in supporting the German economy,' said EPRA's CEO Philip Charls.
EPRA strongly opposes key aspects of the BaFin proposals. Firstly, it opposes the proposal that corporate companies with G-REIT status should be included within the AIFMD and secondly, the German regulator's view that the business of developing, refurbishing, owning and managing property for the long term is not a commercial operating business.
According to EPRA, the confusion between REITs and real estate funds comes because the
underlying business activities of both can be broadly similar. However, the industry association’s view is that the critical identifying features of a fund - as opposed to commercial operating businesses - arises from the relationship and engagement with its investors.
In this respect, the relationship between a REIT and its shareholders and the operation of the corporation is no different to any other publicly listed company, EPRA said.
'Germany has the smallest listed property market of any major economy globally and EPRA believes that if BaFin insists in reclassifying G-REITs as funds, it will be forcing these businesses into a sector where they don’t belong,' added Gareth Lewis, EPRA Finance Director.
The European Public Real Estate Association is the voice of the publicly traded European real estate sector, representing over €250 bn of real estate assets.
