Elite Commercial REIT’s1 landmark listing on TISE is a first for Singapore real estate investment trusts (REITs). Now on a level playing field with UK-domiciled entities, what will it bring to investment markets in both Singapore and the UK?
First Singapore real estate investment trust (REIT) focusing on the UK market
Built a portfolio valued in excess of £500 million since IPO in February 2020
ECHL listed on The International Stock Exchange (TISE) in August 2021
Investors from Asia are increasingly using Singapore as a platform for accessing real estate investment opportunities in the UK and Europe. As the only UK-focused REIT listed in Singapore, Elite Commercial REIT is in a unique position. With the trust’s initial public offering (IPO) in 2020 more than eight times oversubscribed, its huge potential for channelling Asian investment into the UK is clear.
To realise these ambitions, it needed a new and innovative approach to fulfilling tax obligations, delivering value for investors, and attracting investment capital into its business.
As a Singapore-listed REIT, Elite Commercial REIT faced the prospect of operating at a disadvantage to competitors in the UK in terms of tax treatment. UK-domiciled REITs are exempt from corporation tax, with Singapore investors being subject to UK tax at 15% on property income distributions, after applying the UK-Singapore double-tax treaty.
However, using a conventional structure, Elite Commercial REIT would have paid UK corporation tax at 19% on income and gains, with the rate rising to 25% from 2023. This would have reduced distributable income for Singapore investors compared with investing via a UK-domiciled REIT. The consequence would be a less attractive structure for investors that would potentially lower the amount of investment coming into the UK.
That’s why we wanted to work with them – to challenge the status quo and find an innovative solution that would ensure Elite Commercial REIT can compete on a level playing field with UK-domiciled REITs to attract capital.
Elite Commercial REIT was looking for a more efficient tax and operating structure, and a stable platform for its continued expansion in the UK real estate investment market.
“While paying all due taxes in Singapore and the UK as part of our responsibilities as a listed entity, we want to be able to operate on an equal footing with UK REITs,” says Joel Cheah, Chief Financial Officer of Elite Commercial REIT Management Pte Ltd, which manages Elite Commercial REIT.
Finding an actionable solution that worked for the UK and Singapore tax regimes was an unusual challenge, but our team was committed to finding a way forward. Following the assessment of the different options, and insight from colleagues across our international network, we recommended an innovative solution built around listing on TISE. In line with the double tax treaty between the UK and Singapore, the structure enables Elite Commercial REIT’s investors to pay the same UK tax rate on property rental income, as if investing in a UK REIT – eliminating future tax on property gains. This approach was approved by UK tax regulator HM Revenue & Customs (HMRC), providing certainty for the business and its investors.
This original solution has delivered a clear shift in Elite Commercial REIT’s distributable income and its ability to attract investment and bid for UK real estate assets. The trust reports that investor interest has not only increased in Asia, but around the globe. This solution is already being adopted more widely in the Singapore market and being applied to international real estate funds looking to invest in the UK – bringing fresh funds into the country with a multiplier effect for the economy.
One of Elite Commercial REIT’s banking partners recommended us as a team that would bring the ideal combination of real estate expertise, creative approach in finding innovative solutions, and market-leading understanding of real estate listing rules and regulations in both Singapore and the UK.
Our support for Elite Commercial REIT was coordinated by an international team led by Matthew Stannard in the UK and David Sandison, Practice Leader and Head of Tax at Grant Thornton Singapore.
“It was a long 15-month haul to get where we are today, involving numerous moving parts across two quite distinct regulatory regimes. But the Grant Thornton team has brought it all together and delivered the outcome we wanted. David and Matthew led from the front throughout, while their teams worked seamlessly on our behalf. We also benefitted from direct access to a range of subject matter experts within the Grant Thornton real estate practice and international network. This demonstrates Grant Thornton’s bench strength within the network and their colleagues’ ability to understand our issues and provide the right solutions,” says Joel Cheah.
“We’re honoured to have had the opportunity to work alongside the strong team in Elite Commercial REIT to achieve this milestone. The listing on TISE and admission of ECHL as a UK REIT demonstrates our ability to work seamlessly across different regulatory jurisdictions and create solutions with mutual benefits for both the UK and Singapore to deliver best in class solutions for our global clients,” says David.
1 Via its wholly own subsidiary – Elite Commercial Holdings Limited (“ECHL”)