No rush for REITs after Vector failure

Most hospitality operators are taking a "wait and see" approach to real estate investment trusts (REITs) after the high-profile failure of Vector Hospitality, experts said last week.

Vector, the group created by Richard Balfour-Lynn and David Michels, failed to become the hotel industry's first REIT earlier this month after a lack of support from investors.

At William Reed Events' REITs Conference 2007 in London last week, delegates heard that the development had dented the confidence of the hospitality industry, which excitedly welcomed the introduction of REITs at the start of the year as a tax-efficient way to invest in property.

Jim Fallon, founding partner at corporate finance consultancy McQueen, said: "REITs are not a no-brainer bag of money. Vector investors found the proposition hard to swallow despite the value being dropped by 12.5%."

Rod Taylor, head of hospitality and tourism at Europe Arab Bank, said the industry was predisposed to get carried away on waves of enthusiasm, and predicted there would be no more than 35 REITs across all sectors in the UK. "It will only be the best of the best that people will buy into," he said. "As with Vector, if something is not quite right, then the market will say no as it won't be dictated to."

Simon French, equity research analyst at investment house Numis Securities, said the early excitement was misplaced. "I'm not sure what the rush is to invest in REITs as it's still a very new piece of legislation," he said.

Stephen Herring, tax partner at accountancy BDO Stoy Hayward, sounded a more positive note, predicting that there would be three or four REITs established in the next five years, spanning the leisure and hospitality industry.

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