Q&As

What is a REIT and are there any issues which need to be considered when lending to a REIT?

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Published on LexisPSL on 20/11/2014

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • What is a REIT and are there any issues which need to be considered when lending to a REIT?
  • What is a REIT?
  • Issues which should be considered when lending to a REIT

What is a REIT and are there any issues which need to be considered when lending to a REIT?

What is a REIT?

REIT stands for 'real estate investment trust'.

A REIT is effectively a tax-free vehicle for real estate investment, with tax levied at the level of the investors rather than in the vehicle.

The REIT regime was designed to provide 'liquid and publicly available property investment vehicles which are available to a wide range of investors' and which would raise 'productivity in the commercial property sector'.

For more information on the REIT regime, see Practice Note: Real estate investment trusts—summary.

Issues which should be considered when lending to a REIT

When lenders are considering lending to a REIT, in many ways the credit analysis is the same as for other borrowers. For example, lenders need to consider:

  1. the nature of and the risks associated with the portfolio of assets held by the REIT

  2. the projected income for the business, from which the debt will be serviced

  3. the general credit risk attached to the business, and

  4. the nature of the security package

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