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In 2006, part of TAG was systematically restructured in anticipation of the introduction of German REITs. This gave rise to TAG Gewerbeimmobilien-AG, which specialises in office real estate. Following this company's conversion into a German public company (AG) and its registration as a pre-REIT, the conditions for the establishment of a REIT have been created. Such listed real estate funds generate their profit from renting their own commercial real estate and land and are fully exempt from income tax. Only the shareholder is taxed.
In countries such as the United States and the Netherlands, REITs have developed into a popular form of investment since the 1960s. The retroactive introduction of the G-REIT as a tax privileged investment vehicle as of 1 January 2007 is allowing new opportunities to be harnessed in the German real estate market.
Under the legislation, commercial real estate as well as new residential buildings completed after 31 December 2006 are eligible for inclusion in REITs. In the United Kingdom, REITs were introduced at the beginning of 2007.
The prerequisites for REIT status are:
- stock-market listing
- minimum dividend payment
- main focus on real estate investment
- no real estate trading
TAG’s current structure permits short-term conversion of its commercial portfolio into a G-REIT. If the legislation is extended at a later date to include residential property as well, TAG’s subsidiary Bau-Verein zu Hamburg AG will immediately qualify for REIT status.
