The acronym REIT stands for Real Estate Investment Trust. In Germany REITs are listed corporations that invest in all types of real estate and generate income primarily from the rents of the respective properties.
In order to obtain a REIT status and to maintain this over the long term the following conditions have to be met:
- Headquartered in Germany
- Stock exchange listing - at least within the regulated market segment.
- > 25 % freefloat ratio at IPO; after IPO > 15 % freefloat
- > 45 % equity ratio
- > 75 % of gross income must originate from rental, leasing or disposal gains of portfolio assets
- > 75 % of assets must be invested in real property
- > 90 % payout ratio of the profit for the financial year under the German Commercial Code
- < 10 % directly held shares per shareholder
Advantages of a REIT organisation:
- Tax-exempt at company level: German REITs are neither obliged to pay corporate tax nor do they have to pay any commercial tax.
- Great flexibility: globally acknowledged standard for indirect property investments - shares are easily tradable and offer a high degree of liquidity due to the stock exchange listing.
- Strong equity position offers a high degree of safety: the real estate assets of a REIT have to be at least 45% equity-backed.
- To investors: stable cash flows with moderate risk and long-term growth perpective.
- High dividend distribution: 90 % payout ratio of the profit for the financial year under the German Commercial Code.