UK property firms, professional investors and other interested parties considering the opportunity of converting to Real Estate Investment T...

UK property firms, professional investors and other interested parties considering the opportunity of converting to Real Estate Investment Trusts will have the final chance to influence MPs over the governing legislation next week.

As the situation currently stands only major listed propery firms will be in a position to capitalise on the new scheme unless more incentives are provided to smaller players, according to F&C, the investment manager.

Sergie Cristo, communications manager, F&C, told WealthBriefing: "We are making this appeal now because by next week the final discussion will be over and it will return to the finance committee before coming before the whole house in July. Legislation is then expected in the Autumn."

F&C believes the appeal of REITs in the UK will be shaped by the proposed restrictions. These include the need to be listed on certain major stock exchanges, with AIM being a notable exception, a 10 per cent cap on shareholders, restrictions to the level of gearing and rules governing distribution and asset mix.

For smaller property firms and limited partnerships there will massive entry costs, such as those associated with a stock exchange listing, before converting to a REIT and then having to paying a 2 per cent charge on properties.

The UK government has shown that it can be responsive to pressure by lowering the charge from 4 per cent to 2 per cent. However there is still not enough incentive for offshore firms to consider converting, said Mr Cristo.

"The government succumbed to REITs in the first placve because of the tax revenues it was missing out on. However it is also saying that the UK is the last G7 nation to to come out with legislation on REITs - we are lagging behind a little on this."