Following the promulgation of the REIT legislation in Germany, Deutsche Börse has unveiled its offering for real estate companies and investors. The stock exchange operator is to launch a separate segment for the asset class as soon as the first REIT is introduced. Deutsche Börse will also be calculating specific REIT indices. Deutsche Börse will be using the segment and the indices to raise the profile of REITs as an asset class in stock exchange trading. Investors will be provided with an easy way for identifying REITs for a specific investment in listed companies with REIT status. This means that Deutsche Börse will be providing a listing platform for REIT companies, increasing attention among investors and creating new business opportunities for intermediaries such as Deutsche Börse listing partners (investment banks, IR agencies, auditors and lawyers). As a result, the company is helping to establish the new asset class in Germany.
The segment is based on well-known processes and established transparency standards. German REITs can be listed on the EU-regulated market on the General Standard, which is based on the EU minimum requirements, or on the Prime Standard, which imposes the highest transparency requirements in the EU. Depending on the respective national provisions, foreign REITs can also be listed on the Open Market or on the Entry Standard.
“The REIT segment offers investors a high degree of transparency and liquidity, as well the easy identification of REITs for a targeted investment in listed companies with REIT status”, said Rudolf Siebel, Managing Director of Bundesverband Investment und Asset Management (BVI).
Deutsche Börse will calculate two independent REIT indices on the basis of segment membership: the All Share index covers all REITs on the Prime Standard and General Standard, and is accessible for both German and foreign REITs. The REIT “RX” selection index contains the 20 largest and most liquid REITs from the Prime Standard. The components are weighted in accordance with their free float market capitalization. “Deutsche Börse’s RX REIT index offers transparent and liquid access to the top REIT segment” said Dr. Holger Wohlenberg, Managing Director Market Data & Analytics. Product providers can create investment products based on this index, e.g. derivatives and index funds. REITs will be included in the equity selection indices, such as the DAX, MDAX or the SDAX, at the same time until further notice, provided that they meet the respective inclusion requirements. Deutsche Börse is planning to review this arrangement as soon as it has sufficient experience with the specific G-Reits asset class.
Deutsche Börse believes that its offering will act as a catalyst for this new asset class in Germany. “Our REIT segment is our way of actively supporting the positioning of this new asset class and creating a “home” for REIT companies on the stock market”, said Rainer Riess, Managing Director Stock Market Business Development. According to market estimates, REITs will account for a market potential of around €100 billion by 2010.
REITs are real estate businesses with the purpose of purchasing and/or selling, as well as managing properties. The key feature of REITs is that profits are taxed at unitholder level, as opposed to at shareholder level. The lion’s share of the profits, which are generated from the real estate business, are distributed as dividends. REITs were launched for the first time back in 1960 in the US. At present, around €330 billion is invested in this securities class worldwide.
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