Are REIT’s A Viable Exit Strategy For UK Landlords?

Are REIT’s A Viable Exit Strategy For UK Landlords?

14:35 PM, 8th June 2018, About 4 years ago 82

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If you’re looking to continue to enjoy income and the potential for capital appreciation from property investment – without the hassle – a REIT is one of the solutions to facilitate this without the worry of ongoing maintenance, management tasks and ever changing regulations.

Perhaps you’re worried about the challenges posed to Buy-To-Let (BTL) landlords but you are reluctant to walk away from the income and the prospects of further capital appreciation.

I have started this discussion thread to introduce Tom Tennant, Chief Executive of one of the UK’s leading residential REIT providers. Tom has also very kindly agreed to participate in the commenting section of this article, to answer any questions Property118 members would like to raise publicly. Also, at the bottom of this article is a contact form to enable you to request a call with Tom offline.

To follow this discussion, please leave a comment and then subscribe the the comment notifications email. You comment can be anything from a detailed question or simply the word “following”.

What Is A Real-Estate-Investment-Trust?

A Real-Estate-Investment-Trust (REIT) is a highly regulated company, listed on a stock exchange, which owns and manages a diverse portfolio of properties.

REIT’s attract investment in two ways. The first is people who want to invest cash into the property market without the associated hassle of direct ownership of property. The second is to acquire existing property businesses in exchange for shares in the REIT. It is the latter of these which I think could be of interest to Property118 readers, in particular, those considering exiting the Private Rented sector but reluctant to so because they wouldn’t know where else to obtain the same returns as in property. For some landlords, it may be effective to sell their entire property portfolio to a REIT, swapping their equity for shares. In certain cases, this can be extremely effective because the transaction might also quality for CGT rollover relief under TCGA92/S162, also knows as ‘incorporation relief

Qualifying criteria

As a very rough guideline, if your mortgage balances are greater than 15 times your existing yearly rental income or your LTV is greater than 65% it is less likely that a REIT provider will be interested in transacting with you, i.e. buying your property portfolio.

Tax Relief and returns

If your rental portfolio meets HMRC’s definition of being a business you could sell your business to a REIT in exchange for shares. Rolling your capital gains into those shares can be particularly attractive, as can selling the ‘whole business’ in a single transaction with tenants in situ.

The REIT provider is compelled to distribute 90% of pooled rental profits back to its shareholders pro-rata to their shareholdings. Shares are on a listed stock exchange and may be sold at the market value at any time. Capital appreciation of properties within the REIT, as well as its dividend levels, obviously sets the market value of the shares.

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Comments

by Arran Pritchard

3:48 AM, 5th July 2018, About 4 years ago

Reply to the comment left by Bill Morgan at 09/06/2018 - 15:02
Bill,

To qualify for s162, I believe that "all" the business i.e. all the properties are to be incorporated.

You mention that you would sell 25% before the REIT, then I assume if the transfer to the REIT came after sale, the 75% would then be 100% of the business ?

I asked Gabelle Tax specialists if I incorporated only part of my portfolio would I qualify for s162, the reply was I needed to incorporated all the properties to qualify.

Regards
Arran.

by Arran Pritchard

4:39 AM, 5th July 2018, About 4 years ago

Reply to the comment left by Arran Pritchard at 05/07/2018 - 03:48
Later I noticed this had already been answered.

by Arran Pritchard

14:27 PM, 5th July 2018, About 4 years ago

I posted on the PT forum to alert fellow LLs to this REITS being a possible exit strategy in light of the current climate.
However there is also there a thread for the same REITS fund issue with more Q&As.
https://www.propertytribes.com/showthread.php?tid=127634817&highlight=REITS

by Norfolkngood

19:44 PM, 30th July 2018, About 4 years ago

HI Tom,
Just to let you know, one way or another, either immediate or in future I am certainly interested in your REITs company as safe investment income source.
I will now contact you direct to make arrangements with you to go to the next stage, and find out the reality of what you will offer.
Regards
kris

by Tom Tennant - REIT Providor

9:51 AM, 31st July 2018, About 4 years ago

Reply to the comment left by Chris Baker at 30/07/2018 - 19:44
Hi Kris,
Great! I look forward to hearing from you.

All the best,
Tom

by Norfolkngood

14:01 PM, 15th August 2018, About 4 years ago

THE COMMENTS MADE HAVE BEEN REMOVED AT THE REQUEST OF THE AUTHOR OF THEM

by Mark Alexander

14:28 PM, 15th August 2018, About 4 years ago

Reply to the comment left by Chris Baker at 15/08/2018 - 14:01
I look forward to reading Tom's response to your tough critique.

by Tom Tennant - REIT Providor

16:30 PM, 15th August 2018, About 4 years ago

Reply to the comment left by Chris Baker at 15/08/2018 - 14:01
I find this defamation of my character unfair and unjust and I will be forwarding all communications to our legal team. My business is a publicly traded company - everything is above board. Our family-based business has over 100 years of experience on our Board. REITs are highly regulated by HMRC, we simply cannot “scam” anyone, let alone would we wish to.

Unfortunately, we have found no evidence of Kris’s communication with us through our website. As communicated to Kris, we are investigating whether there are any issues with the forms. This is not akin to a Landlord evicting a Tenant for no reason. If Kris had called and left a voice message someone would have got back to him as soon as possible.

If Kris did in fact try to get in touch with us, it is simply unfortunate that the message did not come through. I apologised to Kris for this, believing it to be a technical issues, and offered to call him on Monday, but he did not wish to speak to me. I am quite simply at a loss as to why he wishes to attack myself, and my business in this way.

We have spoken to many people who have contacted us via Property 118, and Property Tribes – so it seems highly unusual that his communications did not reach us. I speak to Vanessa and Nick from Property Tribes every week, as Kris says we have agreed a property / share exchange deal with them. The reason communications may have temporarily ceased is because I am currently on holiday. They insist that they did not say anything along those lines to Kris.

The nature of Kris’s message here is inflammatory, illogical, and defamatory and I believe it should be removed. I hope that all of the other members of this forum recognise this. I continue to be available to speak to anyone that wishes to learn more about my company.

With regards to his two questions:

1. Our year end is 30th June. The reason the accounts are not ready yet is because they are currently being prepared by our accountants and will be audited by BDO in the coming months. As soon as they are ready they will be on our website. We have 6 months from the end of our financial year to produce our accounts as per the Stock Exchange rules, this is the same for every listed company on TISE. We are not hiding anything. Our 2016-2017 accounts are freely available on our website.
2. The share price of the company is partially linked to house prices. I am sure that any member of this forum understands that property prices rise and fall, it is quite simply the nature of the business. Having been through countless property cycles, I believe our Board has a wealth of experience to withstand this.

Respectfully,

Tom Tennant.

by Mark Alexander

16:47 PM, 15th August 2018, About 4 years ago

Am I right in thinking that it would be illegal to release financial information in regards to a publicly listed company before it is audited and filed at companies house?

I also think the reply from Tom is very reasonable, save perhaps for involving lawyers in this, which could prove to be an extremely expensive way to deal with what appears to me to be a storm in a teacup.

by Tom Tennant - REIT Providor

18:56 PM, 15th August 2018, About 4 years ago

Reply to the comment left by Mark Alexander at 15/08/2018 - 16:47
Hi Mark,

Yes you are right. I have also been advised that we are not allowed to even hint at the numbers until they have been audited. I do not know of any public company that releases their accounts within 6 weeks of the end of their Financial Year. We are an open book, and have nothing at all to hide. All the information about the company is available in great detail on our website.

The reason we converted to a REIT was to help Landlords maintain a property income despite the tax and regulation changes.

All the best,
Tom


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