Navigating the Belgian REIT landscape: the free float requirement in a voluntary takeover offer
27 Feb 2024
The initial acceptance period of the voluntary takeover offer on Intervest Offices & Warehouses closed last Wednesday. We expect to hear the outcome tomorrow. Intervest is the second Belgian real estate investment trust (REIT) to receive such an offer, following the (successful) offer by the Brookfield group on Befimmo.
A key consideration in a takeover offer is how to deal with the mandatory 30% free float requirement. According to this requirement, the promoter of a Belgian REIT must ensure that 30% of the securities, attached to voting rights, are held by the public at all times at the latest one year after the company has been registered as a Belgian REIT. The term ‘public’ is to be understood as a person who is not acting in concert with, and does not have a participation relationship with, the promoter. The term ‘promoter’ refers to a person who exercises exclusive or joint control over a Belgian REIT.
Takeover offers for such transactions are usually structured in a specific manner to account for this requirement which applies to the bidder once the offer is successfully closed. In the cases of the bids on Befimmo and Intervest, several remedies were included in anticipation of the bids exceeding the 70% threshold, i.e.:
Aim to drop below the 70% threshold upon closing (assuming the result is close to that threshold) in order to retain the Belgian REIT status in compliance with the free float requirement;
Strive to reach the 95% threshold to proceed to a squeeze out and then most likely opt directly for FIIS/GVBF status (which offers similar tax benefits, albeit with several distinct differences and restrictions such as mandatory limitations on operational activities);
Consider having the Belgian REIT renounce its status with a majority of 80% of the votes cast (this scenario is not very popular as it would result in the Belgian REIT losing its favourable tax treatment); or
Maintain the Belgian REIT status by taking measures to ensure that the new promoter complies with the free float requirement.
As to the last point, the Belgian Act on REITs does not include a transitional period to meet the free float requirements and, to our knowledge, no official guidance is available from the FSMA. In both prospectuses, the bidders have assumed that a transitional period of one year would apply (which is the same period as the one available to the initial promotor to create the free float). In our view, the Belgian Act on REITs would offer a greater degree of certainty if such a transitional period were explicitly included.
Hervé Stanus - Michiel Dewitte
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