Sirius Real Estate Limited (LSE:SRE, JSE:SRE, OTC:SRRLF) is to convert its UK business to a UK real estate investment trust (REIT) from 1 April 2022.
The owner and operator of branded business and industrial parks in Germany and the UK said the proposed REIT conversion follows the company's UK acquisition of BizSpace in November 2021.
By entering the UK REIT regime, the company will no longer be subject to UK corporation tax on income or gains from its property rental business and will be required to pay 90% or more of its UK property rental business income to shareholders annually as property income distributions (PIDS), which can be satisfied by both cash and SCRIP (subscription) dividends.
The REIT conversion is not expected to affect the company's current dividend policy of paying out 65% of annual funds from operations (FFO) and in addition to PIDs, the company will continue to make distributions derived from its German operations (non-PIDs).
Non-PIDs will be treated like "normal" dividends paid by non-REIT companies and will not be subject to UK withholding tax, Sirius explained.
"The proposed conversion to a UK REIT is a natural progression following the company's transformational acquisition of BizSpace in the UK last year, and provides greater comparability to other UK REITs in terms of our FFO and dividend yields for investment purposes," said Andrew Coombs, the chief executive officer of Sirius Real Estate.
Shares in Sirius rose 5.2% to 126.6p following the announcement.