REIT origin stories…

Methodology

Equity REITs are real estate investment trusts that are publicly traded on a government-regulated securities exchange.

Determining an origin date

The primary test for determining the origin date of a country’s equity REIT regime is the establishment of a legal framework that allows REIT entities to be listed and their securities to be publicly traded.

Wherever possible, this is considered the date a legislative instrument is passed or proclaimed by a relevant law-making authority.

In some cases, earlier investment fund legislation might allow for REIT-like entities. We ignore these “proto” or “quasi” REIT phases.

The table focuses on the REIT law origin year.

We are developing an additional table that identifies the point at which a REIT market transforms into an active exchange-traded phase.

It’s not uncommon for national markets to take many years to evolve into an active, modern market.

Definitions

Origin year: the year a REIT law was promulgated by a government or its nominated regulator.

Modern REIT era:

• Core characteristics - broad collective ownership, tax transparency, high mandated distribution levels income earned by the REIT, sector diversification;

• Critical mass - a sufficient number of professionally managed REIT entities with a significant total market capitalisation; and,

• Liquidity: solid trading volumes ensure liquidity for investors.

Tax transparency - a system where net income flows from the REIT entity directly to the REIT investor, who is then responsible for meeting statutory tax obligations. In short, a single level of taxation in the hands of the beneficiary.

My data sources & other approaches

NAREIT’s research and EPRA’s annual global REIT survey provide excellent source material.

NAREIT requires an IPO before it lists a country/region as authorised.

Whereas I include the many countries that have enacted legislation but are not yet out of the IPO starting blocks.

In all cases, I’ve gone back to the enabling instrument of a legislature or its delegated agent (such as a stock exchange, securities authority or prudentiual regulator) to determine the REIT law origin date.

Consistency

Guess what? Not all countries meet the strict requirements of our definition, and yet we classify them as nations with REITs.

For instance, China and Hong Kong don’t allow a single point of tax.

Nevertheless, these governments have specifically enabled REIT legislation, and so we count them in the club.

Indeed, there are very significant differences between the world’s various REIT regimes. Nevertheless, there is a clear consensus about the core characteristics.