Real Estate Investor Magazine South Africa June/ July 2019 | Page 48

COMMERCIAL
REITs performance
Sweating it out
A
Real Estate Investment Trust (REIT) is a public com-
pany which owns and operates income-producing
property.
EQUITES PROPERTY FUND
REITs are bought and sold on the Johannesburg Stock
Exchange ( JSE). REITs are created when companies use
investor’s private money to purchase and operate income
properties. Depending on the REIT, they tend to focus more
on commercial investment holdings such as shopping centres,
office buildings, industrial parks, storage units and have a lesser
focus on residential units.
A REIT aims to pay out maximum (sometimes 90%) of its
taxable profits in the form of dividends to its shareholders. By
doing this, REITs avoid paying maximum corporate income
tax, where as a regular company would be taxed for its profits
and then have to decide whether or not to distribute its
after-tax profits as dividends. Since the 1960s in the United
States, REITs have been a popular choice for income investors
due to their reliable dividend pay-outs and massive capital
appreciation potential
Sources of income the property expenses such as rates, taxes,
electricity, repairs and maintenance are deducted. This results
in a net property amount where interests and costs for debt
finance are also deducted. The approximate average leveraged
bank debt for REITs is around 35% and the rest is made up
of equity. Yields can be anything from around 6-10% returns.
They key benefit of a REIT is the liquidity and convenience an
investor can derive from the investment while still achieving
growth.
SA REITs sweating it out:
The local REIT counter has made a steady comeback
this year after last year’s dismal performance, largely due
to the Resilient group of companies’ alleged misconduct.
Skittish investors fearing yet another corporate fallout
(hallo Steinhoff ), avoided property stocks. The FTSE/
JSE Sapy, which includes the JSE’s top 20 liquid real
estate companies by full market capitalisation, achieved
a total return of -25.26% in 2018, according to Catalyst
Fund Managers, reported BusinessDay. However, better
performance is expected for 2019, with a 9.7% increase in
January, compared to last year.
These are the REITs that reported results in May:
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JUNE/JULY 2019 SA Real Estate Investor Magazine
ANDREA TAVERNA-TURISAN, CEO EQUITES
Results for the year end 28 February 2019
The group has achieved distribution growth of 11.8% for the
2019 financial year, which was largely underpinned by strong
like-for-like rental growth, acquisitions and developments in
South Africa and the United Kingdom and a reduction in the
overall cost of debt.
Equites CEO, Andrea Taverna-Turisan, commented that
“The group’s resilient performance reflects the quality of
assets in the portfolio. We have also complemented the ability
to build a world-class portfolio of logistics properties with
optimising our cost of capital through efficient management
of both the cost of debt and equity. The current set of results
reflect the culmination of our relentless focus on these
elements for the past five years.”
The group’s portfolio focuses on high-quality logistics
properties, and has grown significantly from R1-billion on
listing to R12-billion at 28 February 2019.
All the group’s assets are in well-used logistics nodes
near large population centres and major transport links that
have predictable patterns of strong rental growth. The group
focuses on premium “big-box” distribution centres, let to
investment grade tenants on long-dated” triple net” leases,
built to institutional specifications. The locations of preference
are Cape Town and Gauteng in South Africa and the central
Midlands and ‘last-mile’ fulfilment centres near major urban
areas in the United Kingdom, the group said in its results for
the year-ended 28 February 2019.