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Real Estate Investment Trusts (REITS): A new business model in the FTSE100

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  • Colin Haslam
  • Nick Tsitsianis
  • Tord Andersson
  • Pauline Gleadle

Abstract

This paper is about the Real Estate Investment Trust (REIT) business model. REITs benefit from tax concessions and Fair Value Accounting (FVA) practices. REITs distributing over 90 percent of profits can obtain tax concessions for their shareholders. This encourages profit distribution at the expense of accumulating retained earnings in shareholder equity. The financial viability of REITs depends upon FVA because this records holding gains when property values are increased. These holding gains can be employed to generate additional financial leverage. However, REITs are exposed to property market volatility and this can quickly undermine solvency, credit ratings and financial stability.

Suggested Citation

  • Colin Haslam & Nick Tsitsianis & Tord Andersson & Pauline Gleadle, 2015. "Real Estate Investment Trusts (REITS): A new business model in the FTSE100," Accounting Forum, Taylor & Francis Journals, vol. 39(4), pages 239-248, December.
    • Handle: RePEc:taf:accfor:v:39:y:2015:i:4:p:239-248
    DOI: 10.1016/j.accfor.2015.10.003
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    Cited by:

    1. Lorenzo Simoni & Stefan Schaper & Christian Nielsen, 2022. "Business Model Disclosures, Market Values, and Earnings Persistence: Evidence From the UK," Abacus, Accounting Foundation, University of Sydney, vol. 58(1), pages 142-173, March.
    2. Froud, Julie & Tischer, Daniel & Williams, Karel, 2017. "It is the business model… Reframing the problems of UK retail banking," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 42(C), pages 1-19.
    3. Smyth, Stewart & Cole, Ian & Fields, Desiree, 2020. "From gatekeepers to gateway constructors: Credit rating agencies and the financialisation of housing associations," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 71(C).

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