Real estate investment trust Green Reit could pay 25 per cent tax on the increase in value of some of its properties if the company is sold, it has emerged.
Green Reit’s board offered it for sale on Monday, saying this was the best way to deliver value for investors, as the shares trade at a sharp discount to its properties’ values.
If Green is sold, it may have to pay 25 per cent tax on the increase in the value of any of its properties that are less than three years old, under rules governing Irish real estate investment trusts or reits.
Several assets, including Block I in Green's Central Park office complex in Sandyford, Dublin, and a building on Molesworth Street in the centre of the capital, fall into this category.
It is understood that if the company is sold in its entirety, or the properties are sold in a single lot, the board’s preferred options, then profits will have to be apportioned against individual assets to calculate the tax due.
Dividends paid
Reits do not pay tax once they pay 85 per cent of profits to investors as a dividend.
Green launched on the Irish Stock Exchange in July 2013, the first real estate investment trust created under legislation allowing their establishment in the Republic.
Taking into account the increase in its properties’ value and the dividends paid to shareholders, investors have gained a total of €670 million since its launch, an increase of 97 per cent.
Green's properties were worth €1.45 billion at the beginning of the year. They include Horizon Logistics Park, close to Dublin Airport and the M50 motorway; One Molesworth Street, part of which is let to British bank Barclays; and Central Park.
Its net asset value per share, that is the total net worth of its properties divided by the number of shares in the company, was €1.83 on December 31st, but its stock closed at €1.53 on Friday, a 16.4 per cent discount.
Asset value
The shares gained more than 6 per cent on Monday to close at €1.64, which was still a discount of more than 10 per cent on the company’s net asset value.
Shares have traded at up to 22 per cent less than the asset value. European reits similar to Green, which do not own retail properties, generally trade at a 6 per cent discount. Those that do own shops sell at a 16 per cent discount.
Gary Kennedy, chairman of Green Reit, said in a statement that shareholder value was the board's primary responsibility.
“Given this imperative and following detailed analysis and due consideration, we have decided to focus on the sale of the company or its portfolio of assets,” he added.
Green co-founders Stephen Vernon and Pat Gunne said they wouldn't make an offer for the company, nor would they participate directly or indirectly in any third-party bid.
Tenants pay Green €75 million rent a year and this could rise to €83 million in 24 months. Central Park has space for a further 37,200sq m of offices, while Horizon has scope for an extra 242,000sq m of buildings.
