Real Estate Investor Magazine South Africa August/September 2019 | Page 43

LISTED PROPERTY
A
RIET is a Real Estate Investment Trust which allows
you to invest in the ever-growing Property market
and there’s “no catch” or “twist” because it allows the
average Joe (you and I) to actually invest in physical prop-
erties and make guaranteed returns, without owning the
actual property.
IMPORTANCE
It’s important to note that REIT’s are actual Trusts and work as
such, meaning there are many beneficiaries who are holders
of participatory shares in the Real Estate of the Trust. REIT’s are
governed by the Real Estate Investment Fund Act of 1960. This
Act requires the REITS to pay 90% of their annual earning to
you as a shareholder.
SOUTH AFRICAN REITS
South Africa typically offered only two forms of public traded
property investments: (PLS) Property Loan Stock companies
and (PUTs) Property Unit Trust with unique tax exemptions
and regulations. With an introduction of the new Section
25BB to South Africa’s Income Tax Act and other regulatory
changes brought on by the JSE, REITs will be more tax
transparent to benefit of beneficiaries. Some of the new set
of listing requirements include Property value exceeding USD
300mil; Maintaining debt below 60% and Establishing a Risk
committee which makes the investment case for listed REITs
safer and stronger .
TIPS FOR INVESTING IN REITS
1 Invest with Cloud Atlas via the AMI Real
Estate Fund, while this is not a REIT it
wraps up listed property shares across the
African continent where there isn’t a REIT
framework, allowing you to diversify.
2 Look populations changes and macro-
economic indicators like interest rates to
determine the prospects of the REITs you
want to invest in.
3 REITS are traded publicly on stock
exchanges and have also IPO’s, so its
important to open a share trading account
or speak to your financial adviser.
4 REIT’s offer high liquidity meaning you can
trade the shares without having to buy and
sell physical property.
More unique benefits of South African REITs is that they
are not be subject to capital gains tax on the disposal of
immovable property; no Securities Transfer Tax is levied on the
transfer of shares in a REIT, if a REIT holds a direct, undivided
share in the property it could distribute its rental income via a
“qualifying distribution”.
CURRENT MARKET IMPACT
Typically many South Africans have growing concerns
regarding country especially with respect to Eskom being able
to keep the light on, with that said the property market is set
to increase after as slump in the past two years, but one should
look for REIT’s offered in SA that global exposure especially to
Africa and Eastern Europe.
We see GRIT Income Group, one of the AMIRE constituents,
as a power-house which plans to diversify further into Africa to
tune of at a market cap of U$ 411milllion.
We also Nedbank CIS expanding into east Africa with R1
billion to Kenya’s Centum Real Estate and further up north Africa
we see Cairo looking to develop residential accommodation in
New Cairo which is a very exciting development for growth
in the property market in the slate of slow global economic
growth.
ADDED BENEFITS OF REITS
• Greater diversification - investors are
purchasing a piece of a large estate
portfolio. If one was purchasing a property
themselves, the buyer would only be able
to finance a single property rather than
multiple.
• Increased liquidity - REITs can be sold and
purchased like a stock and the investor has
more liquidity when compared to investing
in a single property.
• Decreased time and management
responsibilities. As an investor in REITs, one
is not responsible for being a landlord as
there is a professional management team
that handles this responsibility on behalf of
investors.
• A secondary source of revenue for
investors. Investors will be provide six
monthly dividends and capital growth.
Investors are advised to be aware that
rental income and distributions from REITs
are not guaranteed. REITs gather their
rentals from a diversified portfolio in order
to reduce the risk of zero distributions.
• Reduce costs - compared to purchasing a
single property which may cost over R1-
million, a minimum investment in a South
Africa REIT is one share. The cost of this
share is dependent on the SA REIT company
and could possibly be below R10 per share.
According to the South African REITs Association, REITs has
been the ‘best performing asset class in the country for the
past 15 years. Potential investors are advised to increase their
wealth portfolio through REITs as it will increase their real
estate exposure.
SOURCES Cloud Atlas Investing
SA Real Estate Investor Magazine AUGUST/SEPTEMBER 2019
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