Hammerson is to become the UK's first property company to convert itself into a Real Estate Investment Trust (Reit), it revealed yesterday, taking advantage of the new tax-efficient structure as soon as new legislation comes into effect next year.
The move will see Hammerson pay a one-off charge of 2 per cent of its property assets to the Government - about £80m - after which all of its profits will be exempt from corporation tax.
Hammerson will then be obliged to pay at least 90 per cent of its tax-exempt profits back to shareholders every year as dividends - which will be taxed.
Unveiling the decision at its annual general meeting in London yesterday, John Nelson, the chairman, said the conversion would eliminate the substantial deferred tax liability on current unrealised gains in its property portfolio, increasing the group's net asset value per share as a result. He added that this would also allow the company to make sale decisions based on their investment value, rather than simply based on tax implications.
"We believe that the introduction of Reits will provide additional opportunities to grow the business over the next few years and enable Hammerson to continue to play a leading role in the transformation of our towns and cities," he said.
The Government introduced legislation allowing property companies to use a Reit structure in the Finance Bill earlier this year.Hammerson has already benefited from a similar regime established in France in 2004.
Several other UK companies are considering the conversion.
Shares in Hammerson closed up 1.7 per cent at 1,202p yesterday, giving the company a market value of £3.43bn.Reuse content