EPRA urges best-in-class REIT model in Ireland

Ireland should look to its European neighbours for examples of how to establish a 'best-in-class' model for its new listed real estate investment trust (REIT) regime.

'Ireland only has to look next door to the UK and France, the biggest listed property markets in Europe, to see how REITs own some of the most attractive office and retail properties in those countries,' Philip Charls, Chief Executive of the European Public Real Estate Association (EPRA), told an Irish REITs conference in Dublin on Thursday.

'These companies play a major role in contributing to their local economies through job creation, providing accommodation for businesses, investments in improving the urban environment, and adopting cutting edge environmental standards and technologies in their buildings,' he added.

Commercial and residential property values in Ireland have started to show signs of stabilising after the record crash of 2006/2007 and yield levels are becoming attractive for international investors. But with Irish banks severely constrained in the credit they can offer to the property sector, international investment capital of the type that could be channelled through REITs is required to help sustain the momentum of the incipient recovery in the market.

Irish Finance Minister Michael Noonan announced during the country’s 2013 Budget presentation at end-2012 that he would make provision for the establishment of Irish REITs this year.

Charls added that REITs are also a vital source of stable dividends, derived from rents, that are well matched to the long-term retirement income liabilities of pension funds, faced with rapidly ageing populations and record low yields on investment assets.

The average European REITs dividend yield was just above 5% over the last five years - comfortably outpacing the general equities dividend yield of Europe’s largest companies and the yield on ten-year government bonds. It was also well above average five-year inflation in the eurozone countries.