Experts demand clarity on G-REITs

German real estate experts cautiously welcomed German finance minister Peer Steinbrueck's draft legislation on German REITs (known as G-REITS), but demanded clarity on the situation regarding residential real estate investment trusts. 'There will be a political debate about the residential REITs,' said Rudolph Hanisch, deputy chairman of the BayernLB board at the Expo Real commercial real estate fair in Munich on Monday. 'This debate should be finished quickly so that we have certainty, with or without the housing REITs.'

Bernd Knobloch, chairman of the Eurohypo board, sharply criticized politicians seeking to make political capital out of REITs. 'There are some people who think because they have nothing else to say in the Bundestag (German parliament) anymore, they have found a subject with which they can get in the newspapers,' he commented. 'It's a shame that we are talking about it at all. People who do not understand anything about what's really going on are discussing it.'

He criticized the argument that introducing residential REITs could lead to an increase in rents. 'It's the other way around,' he said. 'Yields would come down, with the consequence that we could theoretically lower rents because the capital market price would be the same.'

Hanisch too said he did not understand politicians' arguments. 'If we have German REITs without housing REITs, then we will increasingly have the so-called 'locusts' buying houses,' he said, in a reference to a 2005 speech by SPD politician Franz Müntefering where he compared private equity firms to swarms of locusts.

'Will they have a more social approach to the tenants? I don't know,' Hanisch continued. 'So if you want to be more social, you have to implement German REITs with housing.' He said another argument in favour of housing REITs was the recent recommendation by Germany's constitutional court to the state of Berlin to sell off their public housing. 'We need an instrument where local authorities and municipalities can participate,' he said. 'If we have housing REITs, they can participate with about 10 percent and therefore have some influence.'