Belgian REITs join their European peers in accessing capital markets

Laurent Carlier
Mickael Van den Hauwe
1. Until recently, Belgian REITs have been prevented from raising equity through accelerated bookbuilds (ABBs). What has changed?
There has been an amendment to the existing Belgian REIT legislation that allows BE-REITs to raise equity through ABBs up to a maximum of 10% in any trailing twelve-month period and within the limits of the capital authorised by the General Meeting of Shareholders to the Board.
In the past, the regulation (for historical reasons) prevented them from issuing shares without a preferential subscription right or at least a priority allocation right for existing shareholders of at least three days. Hence, given market practices, it was technically not possible to execute ABBs. As a result, BE-REITs were not placed on an equal footing with other Belgian companies and their European peers, who have direct access to capital markets. Additionally, only being able to resort to rights issues for cash capital increases also led to a structural cost of capital handicap (ABBs being much cheaper, executed with lower discounts and flexible versus rights issues especially in terms of market timing).

2. Why is this change in legislation important for BE-REITs?
BE-REITs are growing fast and becoming more international in their activities. Since, by nature, we are active in a capital-intensive industry and, in combination with the growth and the leverage restrictions/dividend model, solid access to capital markets is essential. It is a very important instrument that has been added to the toolbox, and that will allow BE-REITs to better and more proactively manage their debt ratio/capital structure throughout the cycle, which should positively impact the risk profile.
Next, it will allow them to act from a better position to respond to opportunities and risks that require additional capital. And finally, and most importantly, it will ensure a level playing field with other companies, and specifically European REITs, and avoid a structural cost of capital handicap versus peers.

3. How did the BE-REIT Association achieve this significant improvement?
The change in legislation results from a positive dialogue built through the years by the sector with the Belgian authorities and is beneficial to all stakeholders. We are grouped as a sector in the BE-REIT Association and therefore speak with one voice. This cooperation started a few years ago when we realised it was necessary to make the legal framework of the BE-REITs evolve to respond to the needs of the business and changes in (European) regulations.

4. Are there any other developments at the Belgian or EU level that you are advocating for?
We believe there is always room to improve step by step the Belgian REIT model, but that it is today quite balanced. We are very happy with the current success and growth of the sector. With the internationalisation of the BE-REITs towards other European countries, we hope more countries adopt REIT regimes or install a genuine REIT regime (e.g. the Netherlands) in the medium-term, hopefully leading to a European REIT, which is essential to truly build European platforms.