01/10/2013 | by Carisa Chappell

Years after the country's commercial real estate market collapsed, Ireland is preparing to enact REIT legislation in hopes of sparking a revival.

The Irish government currently holds approximately 80 billion euros ($60.5 billion) worth of so called "toxic" commercial real estate assets in the National Asset Management Agency (NAMA), which was established in December 2009 as an initiative to address the problems created by excessive property lending. NAMA's assets include properties, property-related debts and unfinished developments.

Ireland, unlike other countries, has "taken the pain at a very early stage, which I think was very wise and a good move," said Philip Charls, CEO of the European Public Real Estate Association (EPRA).

The Irish government and real estate industry began considering the creation of a REIT regime in 2010. The goal would be to make acquiring NAMA's assets more appealing to investors, according to Charls.

Charls likened the situation in Ireland to the commercial real estate market in Spain. The Spanish government created a REIT regime in 2009 aimed at encouraging investors to take government-held toxic assets off of the books of its equivalent of NAMA. Charls said the original legislation in Spain was "imperfect," but noted that the government is on track to pass necessary revisions to the REIT laws in the near future.

Charls noted that listed real estate companies tend to focus on holding higher-quality assets. As such, EPRA estimates that about 2 billion euros ($1.5 billion) worth of NAMA's portfolio would appeal to the newly created listed property companies.

"It's not the solution at all, but one of the solutions to lower the whole exposure from the NAMA organization," Charls said. While the new legislation would be unlikely to lead to the immediate creation of large-scale companies on par with REITs in the United States, it would represent an important step in the Irish market, according to Charls.

"This is not going to be a revolutionary process," Charls noted. "But if the timing is right, then I think all of the fundamentals for a successful launch will be there."