Felix Leuschner

The Introduction of German Reits: Market Structure and Potential Felix Leuschner

Revision with unchanged content. Real Estate Investment Trusts (REITs) are a bridge between two worlds, the ca­pital markets at one end and the real estate sector on the other, leading to a unique risk/return profile. They bear benefits neither of which can realize stan­ding alone, resembling a hybrid between real estate and equity. REITs invest directly in property and pass on almost all earnings to their share­holders as dividends. By distributing most of their profits, REITs get spe­cial tax treatment and avoid corporate income tax. Because of that REITs have pro­ven very attractive to investors: Their returns have beaten most major e­qui­ty benchmarks over three decades, with lower volatility, while offering pre­dictable cash flows and high dividend yields. Further, they have a low cor­re­lation with other asset classes, aiding portfolio diversification. In Germany real estate has been the most popular investment theme of the past three years, despite its significant underperformance compared to Eu­ro­pean peers, with open-end funds receiving almost all money inflows. The purpose of this book is to highlight the case for REITs in Germany, to analyse the progress of REITs in countries that have already installed a REIT re­gime and to look at what the introduction of a G-REIT would ultimately mean for the German real estate market.