Real Estate Investor Magazine South Africa October 2015 | Page 25
REI RESIDENTIAL
EXPERT Q&A
Wim Prinsloo, CFA
1.
How does a company qualify as a REIT?
The basics tenets for qualifying as a REIT is based on
property ownership and regular income distributions:
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Assets must consist of real estate;
Income must be derived from the rentals and/or
investment income through property ownership.
A high proportion of taxable income must be
distributed to shareholders.
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Although these tenets relate to REITs in a global context,
there are minor differences in qualifying criteria on a
country level.
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3.
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What property sectors do REITs invest in?
REIT’s operate and invest in a number of property
sectors, including Shopping Centres, Apartments,
Office buildings and Hotels. Some interesting, nontraditional property sectors include Self-Storage, Data
Centres, Student Accommodation and Health Care.
4.
What are the investment benefits of REITs?
REITs offer investors the following significant benefits:
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Competitive returns: REITs provide stable &
competitive returns due to their conservative
operating policies.
Greater liquidity: The ability to buy or sell a REIT on a
stock exchange provides greater liquidity compared to
the physical property market.
High dividend yields: REITs distribute a high
proportion of their income and therefore have higher
dividend yields than other equities.
Professional Management: REITs are actively
managed by skilled property managers
Diversification: By investing in REITs, investors can
diversify their real estate portfolios by geography and
property type.
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STATISTICS PROVIDED BY PROPERTY24
www.reimag.co.za
What type of REITs are there?
There are three types of REIT’s, namely Equity,
Mortgage and Hybrids REIT’s.
Equity REIT’s mostly own and manage incomeproducing properties and operate them as part of
their own portfolio.
Mortgage REIT’s loan money for mortgages to
real estate owners, or buy existing mortgages or
mortgage-backed securities.
Hybrid REIT’s as the name suggests are a combination
of both equity and mortgage REIT’s and invest in both
properties and mortgages.
Equity REITs are the predominant form of REITs.
They are actively managed enterprises seeking to
maximize the returns from their property portfolios
by applying their management skills in operations
and finance.
OCTOBER 2015 SA Real Estate Investor
23