Upturn in indirect real estate deals is bucking trend - Alison Gilson

Encouragingly, it also noted that sentiment among investors (including from the US, France and Germany) continues to rise, with digital technology and utilities key sectors for inward investment.

This aligns with my recent experience, for we have seen a strong appetite for investments and an upturn in M&A activity in the energy and technology sectors. These are both key markets for Shoosmiths nationally, and in Scotland, my corporate team has been very busy advising on tech deals involving transactions with US and European investors. For example, we recently advised Artificial Lift Performance Ltd on its acquisition by US corporate Champion X. Green tech, a space in which we support long-standing clients, is also thriving.

However, in the context of foreign and national inward investment, it is the upturn in indirect real estate deals that appear to be bucking the trend in an otherwise challenging real estate sector. Such deals are often quite complex legally, demanding expertise from a range of specialisms. These multifaceted indirect real estate deals can involve land purchase, equity and debt raise, onward sale of Special Purpose Vehicles, construction, planning and tax advice.

This pipeline of complex and specialist legal activity is welcome, and it is driven in part by an increasing number of foreign-based entities with an appetite to buy and invest in Scottish and wider UK real estate.

Notably, many seek to take advantage of tax-efficient structures which allow assets to be acquired from a depressed (real estate) market. However, such inbound deal-making is also fuelled by the pressing UK-wide need for quality housing, demand for Build to Rent, care homes and Purpose-Built Student Accommodation developments. Collectively, these factors appeal to our overseas and UK investor and developer clients.

As a leading legal player in the Living sector, Shoosmiths has advised and guided clients through the complexities of these transactions to completion. Notably, we recently completed a series of transactions for Morrison Community Care Group and Housing Growth Partnership and there are a number of other deals in the pipeline.

However, whilst demand for indirect real estate deals is currently robust, Scotland’s corporate and real estate lawyers are also aware that overseas and UK investors alike seek favourable conditions to support their strategic investment decisions.

Crucially, at a time when the UK has recently seen a change in government, investors will be mindful of any potential changes to Scottish/UK development planning and regulatory regimes. They will also want to continue to see evidence of progressive thinking around infrastructure planning for Scotland’s towns and cities.

Current and any future governments will need to be aware of the wider impact of any unwelcome regulatory changes to the investment landscape – lest they jeopardise Scotland’s favourable position behind London. As we’ve recently observed, well intentioned government controls aimed at one area can seriously impact investment decision-making.

Time will tell if the powers-that-be decide to revisit Scotland’s development sector. For now, as the EY research underlines that Scotland continues to punch above its weight on the global stage for inward investment, the healthy flow of indirect real estate corporate deal opportunities is very welcome.

Alison Gilson is a corporate partner and head of Shoosmiths Edinburgh office