Hammerson joins in criticism of real estate investment trusts

The property group Hammerson became the latest group to criticise the Government's draft legislation on US-style property investment vehicles yesterday as it unveiled a strong set of results thanks to a revival in London's lettings market.

Hammerson voiced some concern over "some issues in the draft legislation which need to be resolved".

Gordon Brown could use the Budget on 22 March to dismantle barriers to the introduction of real estate investment trusts (Reits), for which draft legislation has been published. Reits are tax-efficient investment vehicles that allow shareholders to own shares in a property portfolio. They already operate in the US and parts of Europe.

A spokeswoman explained that Hammerson, along with the rest of the property investment industry, was concerned about the level of entry and exit charges for Reits. Reits will be exempt from tax on property income and capital gains but have to pay an entry charge and distribute income through dividends. Hammerson has one third of its French portfolio in a Reit equivalent, called Siic, and benefits from a tax-exempt status there.

Tax experts at Deloitte recently said regulations governing Reits were potentially flawed in that no shareholder in a Reit could hold more than 10 per cent of shares and there was concern about another regulation governing the level of debt that a trust could accumulate.

Hammerson, which rejoined the FTSE 100 index of blue-chip stocks last year after a 14-year absence, was the best performer on the index yesterday with the stock closing up 54.5p to 115.6p.

The company beat City expectations with a 31 per cent rise in net asset value. Adjusted NAV per share rose to 1,237p at the end of December from 945p a year earlier. Pre-tax profits rose 69 per cent to £698.6m.

Hammerson's chairman, John Nelson, said: "The group has a high quality investment property portfolio and an outstanding development programme and pipeline. We anticipate good growth in the company's rental income over the next three years."