Real Estate Investment Trusts in Spain

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The Spanish government published on October 27, 2009, Spanish Law 11/2009 governing Spanish REITs in the Spanish Official Gazette. It covers the period beginning Januarty 1, 2009.

Real Estate Investment Trusts in Spain

Spain's government started introducing the Real Estate

Investment Trust structure to Spain several years ago as part of a package to help the country's economy.

Real Estate Investment Trusts in Spain - called Sociedades de Inversión en el Mercado Inmobiliario (SOCIMIs) - must be listed. They must have at least 85% of their original 15 million euros in urban property.

The SOCIMI must distribute at leasgt 90% of rental income to shareholders; 50% of profits of sale of property; 100% of income received as dividends from other SOCIMIs and REITs.

Spanish unlisted investment funds will be allowed to convert themselves into a Sociedade Anónimas Cotizadas de Inversión en el Mercado Inmobiliario.

All SOCIMIs are regulated by the Comision Nacional del Mercado de Valores (CNMV).

Spanish Sociedades Anónimas Cotizadas de Inversión en el Mercado Inmobiliario - SOCIMIs - Must Actually Pay Some Taxes

In contrast to other REITs around the world, SOCIMIs will be taxed at 18%, but ordinary shareholders will not pay any further tax on the dividends and distributions they receive. If they receive any nonqualifying income, they pay ordinary Spanish corporate income taxes on that.

Spanish REITs must take the legal form of a listed joint stock corporation (Sociedad Anonima). They require a minimum capital of 15 billion euros. There is a minimum free float of 25%.

Their main activity (minimum of 80% of their assets) is to be the development and purchase of urban real estate. This can include residences, office buildings, retail centers, hotels, and and parking lots. They're also allowed to invest in other SOCIMIs, foreign REITs and Spanish or foreign qualifying subsidiaries and shares or units of real estate Collective Investment Schemes as governed by Spanish Law 35/2003.

At least 80% of their income must come from these sources.

The maximum amount of leverage allowed is 80%.

They must hold at least three separate properties, and none of those three may make up more than 40% of the total value of the combined assets.

Properties they buy must be rented out for at least three years. Properties they develop must be rented out for at least seven years.

Spain enjoyed a big property boom before the financial crash, so it's hoped by the government and business people that setting up Real Estate Investment Trusts in Spain will bring back the good times.

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