Germany Introduces Reits – With A Major Defect?

By Dr. Florian Schultz and Dr. Herbert Harrer are partners of Linklaters, Frankfurt

In Germany, with the largest real estate market in Europe, the introduction of REITs has generated significant controversy. On 2 November 2006 the German government approved the draft law on German Real Estate Investment Trusts (G-REITs). On 15 December 2006 the German Lower House (Bundesrat) rendered a list of many suggestions for amendments. It is expected that the legislative process will be finalised by the end of March 2007, but nevertheless the Ministry of Finance announced that the law will become effective with retroactive effect as of 1 January 2007. The most exiting question: Will the final G REIT law exclude residential portfolios (as the current draft of the government does) or not (as the Lower House (and all important German real estate market participants) suggests). Residential portfolios account for a significant part of the German real estate market. In particular, private equity