Since its US origination in 1960, the Real Estate Investment Trust (REIT) standard has toured around the world, and has by now been implemented in over 25 listed real estate markets all around.

Image: © Nationale Beeldbank

This means that these listed real estate investment firms are exempt from paying corporate taxes, after they incorporate the REIT criteria of profit distribution, a focus away from real estate development, and in many cases a maximization of their leverage. But now, after the fact, it is time to assess the effects of these corporate transformations.

In other words, what have been the effects of the REIT regime on the performance of listed real estate? Obviously, the flow of corporate taxes dried up, but what are the benefits that have been exchanged for this. “Why?” would be the best question to begin this examination. Why do governments around the world introduce the REIT regime? Why would they expect any effects from this conversion? And why would investors care? Dirk Brounen (Professor of Real Estate Economics at TIAS School for Business and Society), Ronald Mahieu (Professor of Finance & Innovation at TIAS School for Business and Society), and Hans Op ‘t Veld (Head of Listed Real Estate at PGGM Investments) have examined these matters internationally.

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The Return Effects of Shifting Tax Regimes, Mahieu, Brounen, op 't Veld (2013)