Certain significant developments in the past three months point to a marked increase in real estate linked activity in 2012:-

• A decrease in stamp duty (real estate transaction tax) from 6% to 2%
• The Government’s decision to abandon the Upward Only Rent Review abolition proposal (Late last year, the Government announced that it would not be bringing forward legislation to abolish upward only rent reviews in pre-February 2010 commercial leases)
• NAMA’s decision to establish Qualifying Investor Funds (QIF) to acquire real estate assets
• Increased enforcement of security by NAMA and non NAMA controlled banks
• The establishment of a group to oversee NAMA

The items listed should prove all attractive to international investors. The stamp duty reduction cuts entry level tax by 66%. A QIF is a regulated vehicle which is not subject to tax on its rental income or on any gains on disposal of its assets. Transfers of units in QIFs are not liable to stamp duty and while exit tax is chargeable, foreign unitholders will normally be able to claim an exemption.

Enforcement by NAMA is normally done by the appointment of a statutory receiver whose function is to manage and ultimately dispose of the asset. The increased frequency of the appointment of receivers by NAMA indicates that much more real estate product is likely to be brought to the market in 2012. NAMA has also indicated a willingness to provide stapled debt financing to encourage buyers and has recently marketed an office block in Dublin on that basis. *

Contributed by Andrew Muckian.

*This is an extract from an article entitled “Buying Distressed Real Estate Assets in Ireland in 2012” which features in the March 2012 edition of The American Lawyer.