In all the doom and gloom facing public services from the forced cuts imposed from the Comprehensive Spending Review of the coalition government, in a headline article by Property Week's reporter Mike Phillips it is reported that a group of London councils are in discussions with a listed property company "Local Shopping REIT" to create a new local government REIT.
Local Shopping REIT has appointed King Sturge Finance to advise on plans to create a joint venture structure that would then allow councils to raise cash from their property assets, while also retaining an element of ownership control and receiving income from their properties.
The innovative proposals would be one of the first steps in allowing councils to use their property assets to cut budget deficits without selling to the private sector.
The Office of National Statistics estimates that local authorities own £240bn of property.
Mike Riley, joint CEO of Local Shopping REIT, said
"we are looking at several options, and there are various ways of structuring things, and clearly REITs do have benefits."
"we have spoken to a number of councils and they have been receptive to ideas about ways they can optimise the value of their assets."
REIT status is a new type of organisation. In the UK, the legislation laying out the rules for REITs was enacted in the Finance Act 2006 and only came into effect in January 2007 when nine UK property companies converted to REIT status, including the five that were FTSE 100 members at that time: British Land, Hammerson, Land Securities, Liberty International and Slough Estates (now known as "SEGRO"). The other four were: Brixton, Great Portland Estates, Primary Health Properties and Workspace Group.
British REITs have to distribute 90% of their income. They must be a closed-end investment trust and be UK resident and publicly listed on a stock exchange recognised by the Financial Services Authority. A closed-end investment trust is a fund established to produce income through investments. They have a fixed number of shares, and trade like stocks.
To support the introduction of REITs in the Uk, the REITs and Quoted Property Group was created by several commercial property and financial services companies. Other key bodies involved are the London Stock Exchange the British Property Federation and Reita. The Reita campaign was launched on 16 August 2006 by the REITs and Quoted Property Group in order to provide a source of information on REITs, quoted property and investment funds. Further information is available on the portal
www.reita.org
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Ed.