The changes announced by the Spanish Government this week include a tax raise from 0% to 15% over retained earnings. Nevertheless, the tax impact of this measure is “limited” since, by law, these companies have to distribute at least 80% of their earnings amongst their shareholders and many of them go well beyond that amount.
On this point, Jesús González Nieto recalled that this regime «is not an exotic product we came up with in Spain, it’s a vehicle similar to other vehicles which exist around us. It would be convenient to change it as little as possible». Luis Molina, the tax lawyer at Uría Menéndez, alerted for the fact that «these changes may alter investors’ decision making».
«REITs have become big players within the Spanish real estate market, especially since the tax regime was adapted to that of the traditional REITs, in 2013. In the coming years, the regime’s success will depend on our legal institutions and certain flexibility when it comes to complying with tax and regulatory requirements, in line with what is practised in other countries around us», added Luis Molina.
A leading role
The positive evolution of the Spanish REITs’ indicators shows how this regime has been taking a leading role within the country’s real estate market.
There are currently 83 REITs listed in Spain, four in the main Stock Exchange (Colonial, Merlín Properties, Lar España and Árima Real Estate), two of them (Colonial and Merlín Properties) included in the IBEX 35 index and the remaining 79, in the BME Growth market, it was revealed during the presentation of the report «Socimis: Solidez y Valor para la recuperación» (REITs: Robustness and Value for the recovery), compiled by BME and consultant JLL, which this year had the collaboration of Uría Menéndez’ office.
On December 2019, Spanish REITs registered a total 25.733 million euro in stock capitalisation. As a consequence of Covid-19, the stock capitalisation was 21.268 million euro last June, with a decrease of more than 17%.
In terms of business, at the end of 2019, REITs registered rental revenues of 2.062 million euro, 8% higher yoy and a 1.700 million euro EBITDA, 22% higher than 2019. The net profit reached 2.500 million euro, 11% higher and the net cash flow was higher than 500 million euro.
In terms of shareholder dividends, the REITs analysed, distributed 1.254 million euro to their shareholders last year, a yoy increase of more than 60%.
Alberto Segurado, director of Debt and Corporate Finance at JLL España, remarked that «there is a huge solidity within the REITs’ real estate market, players which will, no doubt, keep growing, boosting and professionalising the Spanish real estate market».
For Jesús González Nieto-Márquez, «REITs play a leading role in the real estate market, to which they bring an extra ability to attract financing and more transparency and to the financial market which has, thanks to these vehicles, real estate rental products and a wider diversity of risks on the investors’ portfolios». BME’s managing director also highlighted «the REITs’ great openness in terms of their own shares» and he further stated that the sector «will start quieting down and that it is currently immersed in a process of consolidation for both societies and assets».