Fund structures being used by REITS.

Most readers are, I’m sure, aware of the convergence between funds and REITs. Increasingly, listed REITs are adopting the style and structure of unlisted funds, but with the added provision of liquidity, to capitalise on investor demand for the latest emerging sectors where they find it difficult to obtain exposure. The asset managers of the REITs find it easier and quicker to raise equity capital via the IPO route and are obviously hoping that they will command valuation premium (to NAV), enabling them to issue more equity on an accretive basis, thus aggregating a portfolio of critical mass efficiently. The two most recent examples in the UK are Life Sciences REIT and Co-Living REIT. The distinction between Funds and REITs is therefore more blurred. 

REITs no longer have to be public

Similarly, it is not a secret that from 1 April 2022 the requirement that a REIT has to be listed on a recognised exchange is to be lifted. The rationale being that this should alleviate administrative burdens and enhance institutional attractiveness. Personally, I do not see how that will have a negative impact on potential REIT IPOs, merely an alternative structure for unlisted Funds. However, the fact we will now have, like the US, traded and non-traded REITs, does mean that the clear demarcation between public and private structures is less obvious.

Defining real and virtual: adventures into
a new world

However, I find that the most interesting convergence currently occurring is between the traditional and virtual real estate worlds. I must thank one of my students for highlighting this to me. Each year they must choose a dissertation topic.