Excellence Nessuah this week launched Israel's first Real Estate Investment Trust (REIT) just as real estate shares have enjoyed a strong start to the year. "There is a lot of excitement in the real estate market at the moment with stocks picking up, but it is too early to tell whether the REITs market will kick off in Israel this year. It might take some time for them to get established in Israel," said Joseph Wolf, analyst at UBS. Excellence Nessuah said the new fund is currently in the process of raising capital from investment institutions, and in locating properties in which to invest. The fund, called REIT 1, will be established together with Ariel Aven, former executive vice president of Gazit Globe Ltd., who will act as chairman. Shmuel Sayad, former CEO of Naveh-Gad Construction and Development Corp, has been appointed as CEO. REIT 1 is expected to make a public listing within the next 12 months in accordance with the new REIT legislation. REITs were introduced in Israel early this month, following the amendment to the Income Tax Ordinance, with the aim of boosting the country's real estate market. The REITs allow for various types of properties, allowing the public to make investments linked to real estate without having to purchase a property directly. As such, the new financial instrument enables small investors to participate in large-scale real estate projects, while at the same avoiding double taxation. Similar vehicles exist in the US and Canada and are expected soon in the UK. "The advantage is Israel is that the real estate market has not reached its peak yet and the introduction of REITs in Israel will mark an opportunity for additional foreign investment to come into Israel," said Leon Harris, International Tax Partner at Ernst & Young Israel. To qualify for REIT fund status, a company must be incorporated, managed and controlled in Israel. There is a statutory limit of 60 percent on the amount of leverage Israeli REITs can assume and, second, Israeli REITs must have at least 75% of their portfolio invested in domestic real estate assets. Other provisions include a mandatory listing on the Tel Aviv Stock Exchange within 12 months; at least 100 shareholders in the company upon registration; and that no more than five of the investors can directly or indirectly own more than half of the REIT shares. "There are rigid rules and limitations to Israel's REIT legislation, but we believe that with time those will be relaxed, like in the US in the 1960s," said Harris.