Slough Estates to embrace UK-REIT, review US business

Slough Estates, the UK-based property investment and development company, has announced it is to begin the process to obtain real estate investment trust (REIT) status in the UK.

Barring any last-minute hitches, the UK and Germany are to introduce REITs, known as UK-REITs and G-REITs respectively in 2007 in a move that will have a considerable impact on the real estate sectors in both countries.

France, Belgium and the Netherlands already have REIT-type structures. REITS were originally introduced in the US in the 1960s to allow investment in real estate while reducing or eliminating corporate income taxes. The REIT structure is designed to provide a similar playingfield for investment in real estate as mutual funds provide for investment in stocks. REITs can be publicly or privately held and public REITs can be traded on the stock exchange.

In a statement issued on Thursday, Slough Estates said it 'believes that conversion of the company into a UK-REIT is in the best interests of shareholders and [it] expects to become a UK-REIT with effect from January 1 2007.'It said the UK-REIT legislation had particular advantages in the context of the company's development-led business model as most of the development activity would be tax exempt.

UK-REITS will be required to distribute at least 90% dividends to investors and therefore the company is establishing a new dividend policy 'with a high pay-out ratio for investors'.

As France accounts for over 40% of Slough Estate's portfolio in Continental Europe, the company said it has applied for a secondary listing on Euronext Paris stock exchange in order for its to operate a SIIC - the French REIT - from January 1 next year.

The company also indicated it is exploring its strategic options for its US business consistent with the board's stated strategy 'of focusing on the provision of flexible business space in the UK and in Continental Europe'. Slough emphasised that the process is still at an early stage but said the options being considered included an immediate or phased divestment, a joint venture or merging the US business with a third party.