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German property investment vehicles and the introduction of G‐REITs: an analysis

German property investment vehicles and the introduction of G‐REITs: an analysis Purpose – Germany is the biggest real estate market in Europe. Although some established vehicles for indirect property investments are available, the German real estate market is dominated by direct investments and lags behind its international peers in capital market integration. The purpose of this study is to examine whether the recent launch of German REITs may improve this situation. Design/methodology/approach – Existing indirect property investment vehicles and the new G‐REIT are analysed and compared along the dimensions of transparency, liquidity and risk/return characteristics. In addition, potential capital flows into G‐REITs are investigated and economic implications derived. Findings – The study identifies the limitations of existing German indirect real estate investment vehicles and demonstrates the superior characteristics of the new G‐REIT. Substantial short‐term capital flows from existing vehicles to G‐REITs are, however, unlikely. Instead the temporary exit tax will foster an economically beneficial reallocation of capital by private companies and public authorities through property sales to new domestic and international investors via G‐REITs. Originality/value – The results indicate that G‐REITs have the potential to attract substantial funds in the medium term and facilitate a more integrated and developed German property and capital market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Investment & Finance Emerald Publishing

German property investment vehicles and the introduction of G‐REITs: an analysis

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1463-578X
DOI
10.1108/14635780810871614
Publisher site
See Article on Publisher Site

Abstract

Purpose – Germany is the biggest real estate market in Europe. Although some established vehicles for indirect property investments are available, the German real estate market is dominated by direct investments and lags behind its international peers in capital market integration. The purpose of this study is to examine whether the recent launch of German REITs may improve this situation. Design/methodology/approach – Existing indirect property investment vehicles and the new G‐REIT are analysed and compared along the dimensions of transparency, liquidity and risk/return characteristics. In addition, potential capital flows into G‐REITs are investigated and economic implications derived. Findings – The study identifies the limitations of existing German indirect real estate investment vehicles and demonstrates the superior characteristics of the new G‐REIT. Substantial short‐term capital flows from existing vehicles to G‐REITs are, however, unlikely. Instead the temporary exit tax will foster an economically beneficial reallocation of capital by private companies and public authorities through property sales to new domestic and international investors via G‐REITs. Originality/value – The results indicate that G‐REITs have the potential to attract substantial funds in the medium term and facilitate a more integrated and developed German property and capital market.

Journal

Journal of Property Investment & FinanceEmerald Publishing

Published: Apr 25, 2008

Keywords: Real estate; Investments; Trusts; Germany

References