Independent Segment and Indices for German REITs

Following the promulgation of the REIT legislation in Germany, Deutsche Börse unveiled its offering for real estate companies and investors. The stock exchange operator has since launched a separate segment for the asset class and now calculates specific REIT indices.
 
Deutsche Börse uses the REIT segment and its indices to raise the profile of REITs as an asset class in stock exchange trading. Investors are provided with a simple way for identifying REITs in order to make investments in listed REITs companies simple and transparent.

The segment is based on well known processes and established transparency standards. German REITs can be listed in the EU-regulated General Standard market, which is based on EU minimum requirements; or in the Prime Standard which imposes the highest transparency requirements in the EU. Depending on the respective national provisions, foreign REITs can also be listed in the Open Market or in the Entry Standard.

“The REIT segment offers investors a high degree of transparency and liquidity, as well fast identification of REITs for targeted investment in listed companies with REIT status”, said Rudolf Siebel, Managing Director of Bundesverband Investment and Asset Management (BVI).

Deutsche Börse calculates two independent REIT indices based on segment membership:

• The All Share index covers all REITs on the Prime Standard and General Standard, and is accessible for both German and foreign REITs.
• The REIT “RX” selection index contains the 20 largest and most liquid REITs from the Prime Standard.

The components are weighted in accordance with their free float market capitalization. Product providers may create investment products based on the above indices, e.g. derivatives and index funds.

REITs wil also be included in the equity selection indices, such as the DAX, MDAX or the SDAX until further notice, provided that they meet the respective inclusion requirements.

Deutsche Börse believes that its offering will act as a catalyst for this new asset class in Germany. “Our REIT segment is our way of actively supporting the positioning of this new asset class and creating a “home” for REIT companies on the stock market”, said Rainer Riess, Managing Director Stock Market Business Development. According to market estimates, REITs will account for a market potential of around €100 billion by 2010.

REITs are real estate businesses with the purpose of purchasing and/or selling, as well as managing properties. The key feature of REITs is that profits are taxed at unitholder level, as opposed to at shareholder level. The lion’s share of the profits, which are generated from the real estate business, are distributed as dividends. REITs were launched for the first time back in 1960 in the US. At present, around €330 billion is invested in this securities class worldwide.