Last week, Vistra’s Alternative Investments team was amongst the 44,536 Real Estate professionals attending one of the industry’s largest conferences; EXPO REAL. Held in Munich, the event aims to bring together experts from across the world, whilst providing a platform for thought provoking conversation between peers.
In a time of regulatory change, and geopolitical uncertainty, this year’s event yielded a number of particularly interesting opinions. Here are our four key takeaways from our time at EXPO.
1. Brexit is one of the key challenges facing the industry, but capital is still being raised in record amounts, and deployed successfully across the world.
It seems Luxembourg is the talk of the town, but both the UK and the Channel Islands also remain attractive domiciles for European fund managers raising global capital. It is clear that the potential loss of passporting rights for UK managers is causing them and their advisers to think in more depth about where they plan to structure, and to market their vehicles.
2. Changes to Capital Gains Tax rules in the UK are proving a further challenge for investors in the region.
Managers and asset owners are preparing for the proposed changes to CGT rules, due to take effect from April 2019. In particular, any planned refurbishment, rent reviews and re-gearing of leases is like to be brought forward in advance of the April deadline, in order that any increase in value is reflected in the rebased value. Administrators are also preparing for the new record-keeping requirements with regards to investor’s percentage holdings.
3. In a low interest environment, with decreasing yields, active management is more important than ever.
Despite the rise of index investors, ETF’s and robo-advising, active management continues to deliver strong risk-adjusted returns. According to INREV’s Global Real Estate Fund Index, APAC outperformed both the US and Europe, with a return of 2.25% in Q2. Also of note was that non-Core funds outperformed Core strategies, with a return of 2.48% vs 2.31%.
4. Buyers of German assets are carefully considering how to approach changes to transfer tax on share deals in the region.
Under current legislation, Real Estate Transfer Tax ("RETT") is triggered when at least 95% of shares in a Real Estate owning structure are transferred within 5 years. Proposed changes to the German tax law would mean RETT is triggered when at least 90% of shares are transferred within 10 years. It is thought that these rules could be implemented retrospectively, so those considering share deals currently should examine carefully the new rules and their potential impact on the investment.
As a leading provider of flexible and tailored solutions to the Alternative Investment industry, Vistra is able to assist global managers in navigating the increasingly complex landscape they face. For more information, please get in touch.
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