In the face of declining retail property values and highly leveraged companies, a new structure might be needed
Real Estate Investment Trusts (REITs) have been a huge success globally, providing an income-producing, liquid, tax-efficient structure for investors to participate in real estate. The key to their success is the high dividend pay-out ratio, which provides an ongoing cash return to shareholders. Globally, shopping centres have been the key asset class of some of the largest REITs, and indeed the sector has been structurally overweight in shopping centres. Why so? Because shopping centres are multi-tenanted, large assets, requiring ongoing capital expenditure, producing historically stable cash flows, and asset management opportunities. As such, they were ideally suited to both asset owners and investors.