MoFoREAL: European Real Estate Newsletter (Q3 2023)

Welcome to the latest edition of MoFoReal, our newsletter highlighting recent activities of and other developments in MoFo’s European Real Estate team. In this edition, we consider the Sustainability Disclosure Regulations (SDRs) of the UK Financial Conduct Authority (FCA) and changes made earlier this year to the regime for UK real estate investment trusts (REITs).

As always, we hope you enjoy reading MoFoReal and welcome your feedback and suggestions for future issues.

Sustainability Disclosure Regulations

The UK’s financial services regulator, the Financial Conduct Authority, is proposing to introduce Sustainability Disclosure Regulations to combat ‘greenwashing’ by regulated firms. With the global market for sustainable investment products expected to reach US$30 trillion by 2030, it is critical that investment products that are marketed as ‘sustainable’ satisfy objective, measurable criteria and adhere to standardised labelling conventions.

The final policy statement was due to be published on 30 June 2023, although this has now been postponed to Q4 2023 following extensive feedback received during the consultation period. The SDRs will introduce three sustainable investment labels which can be applied to investment products, along with various new disclosure requirements and naming and marketing restrictions.

Whilst we await final publication of the SDRs, more information about the FCA’s proposals can be found in our recent client alert.

On the REIT Track

UK real estate investment trusts benefit from certain tax exemptions that have the effect of putting their shareholders in a tax position broadly equivalent to that of a direct investor in UK real estate. REITs have increased in popularity as property investment vehicles for institutional investors following a progressive relaxation of the regime’s qualifying criteria since its inception in 2007, with the latest changes taking effect earlier this year.

Historically, a REIT’s shares were required to be admitted to trading on a recognised stock exchange in order to qualify, but the scope of this rule has been significantly relaxed. As a result, so-called ‘private REITs’ are becoming more commonly used as joint venture vehicles for UK real estate investments, though there are still further changes that could be made to reduce barriers to entry.

A summary of the current UK REIT regime can be found in our recent client alert, along with some thoughts as to how the regime could be made even more attractive to investors in the future.

Recent Deal Snapshot

MoFo’s European Real Estate Group is pleased to have recently advised long-term client Pioneer Group, an owner and operator of life sciences and high-tech campuses and ecosystems, on its joint venture with Oxford Properties Group to convert Victoria House in Bloomsbury Square, central London, into a state-of-the-art life sciences hub.

Oxford and Pioneer plan to convert the Grade-II listed Victoria House into a 300,000 square foot wet lab-enabled life sciences space, with work expected to be completed in autumn 2024. The completed project is expected to support an ecosystem of occupiers ranging from new start-ups in designated incubator spaces, to larger pharmaceutical companies, as well as firms supporting the life sciences industry.

London team members Oliver s’Jacob and Tom Hutchinson advised Pioneer on its joint venture arrangements with Oxford, including the asset and development management agreement for the property.

Team News

On 8 September, London team members Oliver s’Jacob and Tom Hutchinson took part in Colliers’ annual Mudathon, in aid of three charities: Sands, The Brain Tumour Charity, and Cornhill Macmillan Centre. Billed as the ‘commercial property industry’s extreme 5k mud challenge’, Oliver and Tom completed the course in a combined time of 2:16:46, coming 15th and 17th respectively (out of a total field of 298), and connecting with a good number of (equally filthy) participants from the UK real estate market along the way.