Real Estate Investor Magazine South Africa May 2013 | Page 50

PROFILES

BY ANGELIQUE REDMOND

The Reality Of

REITs

With Marius Fenwick

M

arius Fenwick is a Certified Financial
Planner with an advanced postgraduate diploma specialising in
investment planning, portfolio structuring and
estate planning. Marius has more than 10 years
experience in the financial services industry
and specialises in structuring international
investment portfolios and is a shareholder
and Chief Operating Off icer of Mazars
Financial Services. Mazars are a f inancial
consultanty service offering skills such as
auditing, accounting, tax and advisory services.
REImag recently had the chance to ask him
a few questions about what the introduction
of REITs to South Africa will mean for the
propert y industry and what we can expect when
they are introduced this month.

investors are not familiar with, the introduction
of REITs eliminates this problems since the
US, Europe, Japan and Australia all make use
of REITs.

“Invest in more than 3
stocks…diversification
among assets as well as
asset classes are prudent. ”

There has been a high level of investments into
large cap property stocks but REITs in SA
have not yet been available to foreign investors.
I do expect a high level of flows due to the fact
that many foreign fund managers and many
foreign pension funds are only allowed to
invest the property component of their funds
in REIT structures.

What effect has the property
industry already seen?
Our property industry has grown to more than
R200 billion. International investors have
become serious investors in some of our larger
property stocks holding up to 15% of particular
stocks. The effect of REITs in SA has not yet
been noticed since it will only launch on 1
April, but inflows from international investors
can be expected.

Have we seen more foreign
interest in listed property companies?

How has the introduction of REITs
changed the property game?

Have there been any negative effects
since REITs were introduced?

REITs were introduced internationally in
the early 1960’s. This was a great opportunity
for investors to gain access to listed property
companies and obtain a diversified portfolio
of listed property stocks. The main benefits
are that the investment requirements are much
lower than buying the actual property and
REITs offer high levels of liquidity, whereas
investments in direct property don’t. With the
introduction of REITs to SA we’ve become
much more of an international player. Listed
property stocks, property loan stocks and
unit trusts have structures that international

Since the announcement that REITs will
be introduced, I have mainly heard positive
comments.

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May 2013 SA Real Estate Investor

Is there any concern over liquidity?
Smaller stocks always carry more liquidity risks
than larger stocks and I expect the same to
apply to REITs. This also implies that investors
that manage funds that may include property as
an asset class will probably stick to the REITs
with exposure to underlying property stocks
with larger market caps.

ABOVE: Marius Fenwick Chief Operating
Officer of Mazars Financial Services

Where do you see the listed sector
going this year, based on their
results?
I do not expect the same returns that we have
experienced over the past 5 years. If the long
bond yield and low interest rates are considered
then capital volatility and possible capital
losses are possible. Property does however
hold one strong trump card and that is rental
income. Irrespective of capital f luctuations,
rental income remains pretty constant and
generally increases with inflation and provides
distributable income. For income bias investors
this remains the main reason for investing in
property. As far as returns go I think one can
expect a yield of around 6% to 7% and capital
growth of around 5% to 6%, providing a
total return of between 10% - 13% - however
this may come with more volatility than
experienced over the past 5 years. The listed
property sector may see a further expansion of
new listed companies and the trend of mergers
and acquisitions of current listed property
companies will probably also continue.

Will the REIT structure cause any
issues or concerns?
I have not encountered any negative comments.
The transparency regarding structure and in
particular taxation is a huge improvement if
compared to property loan stock.

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