Asia Pacific REITs: a comparative regulatory and tax study, commissioned by Asia Pacific Real Estate Association and sponsored by Perpetual, highlights the different ways in which REITs are regulated and taxed within the region.
The report looks at REIT structures, including the nature of their operations, capital management, investor reporting, alignment of interests, related party transactions, and regulatory and taxation issues.
The report identified features considered important by investors, such as the need for management that is local to a REIT’s country of operations, and a strong preference for gearing of 50 per cent or less.
The need for the same capital management tools as operating companies, the removal of limits on foreign ownership of REITs and a strong preference for semi-annual or quarterly reporting against benchmarks were also considered.
The report also looked at the preference for semi-annual or annual independent market valuation of assets, the importance of effective regulation or related party transactions, and the need for a REIT to be a flow-through entity for tax purposes.
Perpetual Corporate Trust general manager for corporate client services Andrew Cannane said the study would promote REITs as an investment class through “a more thorough understanding and explanation of differences in structure and regulations of REITs across Asia Pacific”.
“It is no surprise to us that Australia and Singapore come out on top in this survey due to their strong regulatory framework, reporting, valuation guidelines and governance in relation to related party transactions,” said Mr Cannane.
APREA chief executive Peter Mitchell said the report “emphasises the essential requirement of proper tax treatment – REITs are in essence a vehicle to enable property to be traded publicly as well as directly”.
“For this to work there has to be the same tax treatment for both and that’s one reason why institutional investors are particularly attracted to the REIT markets of Australia and Singapore,” he said.
