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Inclusion of German REITs within the scope of the EU’s Alternative Investment Fund Managers Directive would be ‘misguided’, Russell Platt, CEO of Forum Partners, has warned.

´It could also have unintentional side effects,´ he said. Platt made the comments following a report earlier this week that Germany’s Federal Financial Supervisory Authority BaFin is proposing to include domestic REITs under AIFMD.

‘It would be a huge mistake,’ he told PropertyEU. ‘First of all, REITs are public companies, not private funds. The AIFMD rules have been drawn up to address concerns about the level of transparency and disclosure of non-listed vehicles. Public real estate companies are already subject to control by securities regulators. These very stringent rules have been put in place precisely to avoid conflicts of interest and to protect the rights of shareholders (which the AIFMD is also seeking to do).’

According to the European Public Real Estate Association (EPRA), the potential classification of the G-REITs as part of the fund sector would also be ‘detrimental’ to the future growth of the public sector. Platt fully endorses that conclusion. ‘The proposal could have a potentially chilling effect on Germany’s public real estate market,’ he said. ‘The German public real estate market is already very small. This proposal would draw assets back into the private domain.’

Regulators like BaFin need to be educated about the nature of REITs, Platt added. ‘They don’t appear to have a clear idea about these structures. For an investor, having a stake in a listed company like DIC Asset means having a share of the assets and the management team which operates them. REITs are not funds, they are not a passive collection of assets. They are a business like any other.’