By Kyle Fishburn and Allen Kenney

The Australian Parliament in September approved tax law changes that bring the country's REIT regime closer to that of the United States. The new guidelines should enhance the growth opportunities available to Australian REITs.

The first major change will allow stapled REIT managers to destaple. Historically, Australian REITs with active businesses stapled to avoid being taxed like a company. However, changes passed in Parliament late last week now allow managers to restructure to create an active business subsidiary, analogous to the US REIT regime.

"Importantly, the changes mean Australian REITs can now acquire overseas REITs in exchange for their own equity and create a future platform for continued growth" said Trevor Cooke, executive director of the international & capital markets division of the Property Council of Australia.

The second change will also make it easier for Australian REITs to invest offshore. Australian tax law has always made it difficult for managers to control an offshore REIT that generates trading income.

The changes allow all foreign sourced income to flow through to security holders untaxed, including income from a taxable REIT subsidiary. Both reforms apply from July 1, 2007.

Cooke praised the changes for enhancing the "international competitiveness" of Australian REITs and noted that both of Australia's major political parties are committed to further reform in line with the Property Council's REIT modernization strategy.

REITs, Eh? Real estate investment experts descended on Toronto in September to dissect the Canadian REIT market. The RealREIT conference was sponsored by REALpac, a Canadian industry association for owners of investment real estate. The conference included seven panels covering diverse topics ranging from highly technical discussions on REIT taxation to a view from the "executive office," in which leaders of six of Canada's most established REITs discussed growth strategies in today's less predictable commercial real estate market. A major part of the conference explored some the challenges that Canadian REITs had faced during the preceding year. In a presentation on the current state of the market, RBC Capital Markets Managing Director Carolyn Blair analyzed some of the issues that had put a damper on the industry's year-to-date return of more than 9 percent. They included new, restrictive real estate tax laws; the privatization of multiple leading REITs; quarterly volatility; higher interest rates; and the effects of the recent "credit crunch." On the positive side, though, Blair noted that in the prior 12 months, the Canadian market had seen a net gain in REIT listings, as well as an increase in REIT capitalization to $28.4 billion U.S. Michael Brooks, REALpac's executive director, said that this year's turnout was the "best ever" for the conference. Brooks said the conference embodied the "resilience and the evolving nature of the current REIT market in Canada." "Everyone who attended was looking to gain some insight into how the next chapter for our industry will unfold, and everyone got those insights," he says.