Listing real estate investment trusts on The International Stock Exchange

With The International Stock Exchange being the largest market for all listed UK real estate investment trusts, listing one has long been a popular option.

Despite the UK Finance Act 2022 (UK FA) relaxing the real estate investment trust (REIT) conditions and leading to queries as to whether a listing is still relevant, listing on The International Stock Exchange (TISE) remains an attractive and certain option for REITs.

The UK Corporation Tax Act 2010 (CTA) previously required UK REITs to be listed or traded on a recognised stock exchange and this requirement was, in practice, frequently met by a listing on TISE.

The changes implemented to the CTA conditions as a result of the UK FA mean that UK REITs no longer need to satisfy the listing requirement where institutional investors hold at least 70% of the ordinary share capital of the REIT.

Institutional Investors / the GDO Test

In determining whether the 70% institutional investor ownership requirement is met, ownership can be traced through companies, partnerships and other types of entities including unit trust schemes and contractual co-ownership schemes.

If, however, the REIT is owned by a collective investment scheme limited partnership, such limited partnership must also must also satisfy the ‘genuine diversity of ownership’ condition (the GDO Test) (which considers whether the fund is marketed to new investors) in order to be treated as an institutional investor. The GDO Test broadly requires the relevant partnership documentation to specify that interests in the limited partnership will be widely available and the intended categories of investor, in addition to providing confirmation that the limited partnership will be marketed and made available to such target categories. The Spring Finance (No. 2) Act 2023 extended the GDO Test to enable multiple vehicles to be taken into account in order to satisfy the condition, rather than just one entity.

Further, in order to ensure compliance with the GDO Test, there should be no limitations to the intended categories of investor, nor should any of the terms and conditions of the limited partnership limit investment to a select group within the target or deter a reasonable investor in such category.

Despite the relaxation of UK FA the listing condition, TISE is still relevant for REITs: TISE is designated as a recognised exchange for the UK REIT regime by UK HMRC and a listing on TISE provides certainty. It satisfies the CTA without the need to monitor and ensure ongoing compliance with the minimum 70% institutional investor ownership requirement.

TISE has updated its Listing Rules in order to streamline the process for listing a UK REIT and to remove certain previous listing conditions: TISEA's Specialist Companies Equity Listing Rules (Specialist Companies Listing Rules), allows new REIT issuers (as well as REIT issuers with securities currently listed under the Equity Market Listing Rules on TISE who, if eligible, may be able to re-categorise as Specialist Companies) to benefit from the greater flexibility the rules allow.

TISEA's Specialist Companies Equity Listing Rules are streamlined and more flexible than the existing Equity Market Listing Rules (which focus on trading companies and investment vehicles).  Simplified initial application, disclosure and continuing obligation requirements, together with competitive fixed listing fees, mean that TISEA is able to offer an efficient listing solution for closely held REITs.

How Ogier can help

Ogier's listing agent, Ogier Corporate Finance Limited (OCFL), is one of the leading listing agents in the offshore listing market and offers a cost effective, efficient and responsive service.

As part of OCFL's full service offering, we provide an ongoing post-listing service to issuers, providing advice and assistance in relation to TISEA's Listing Rules and compliance with the continuing obligations applicable to listed issuers.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice