Real Estate Investor Magazine South Africa October 2015 | Page 48

REITS

Online Shopping a Boon for Logistics REITs
Long term investing specialising
in the Logistics Industry
BY GRANT LOWTON

I

t is a familiar notion that online shopping has
made certain purchases more convenient. This
has amplified the need for some companies to
raise their web presence in order to gain competitive
advantage, or even just to remain relevant. Notably
though, it has also increased the need for the
warehousing and distribution of merchandise. This in
turn makes a compelling case for long term investment
into Real Estate Investment Trusts specialising in the
Logistics industry
What is a REIT?
A Real Estate Investment Trust (REIT) is a company
that owns income producing real estate.
A REIT is much like a specialized mutual fund, as
opposed to a traditional home ownership. A REIT may

invest in a wide variety of companies that build, own
and manage commercial real estate. REITs provide the
investor an opportunity to own a fraction of shopping
centers, office buildings, parking garages, factories and
a number of other property types that produce and
provide income.
By law, REITs must distribute 90% of their income
through to shareholders, who are liable for taxes on
that income. The distributions are taxed as ordinary
income, only once, at the shareholder level. This is
unlike corporate dividends, which are taxed once at the
corporate level and then taxed again at the shareholder
level.
For decades, the rate of shopping centre growth in
the United States was robust. As suburban population
density increased and purchasing power thrived, retail
landlords strategically positioned themselves to benefit

US SHOPPING CENTRE GROWTH RATE, 1974 – 2013
Source: ICSC, Cowen and Company

46

OCTOBER 2015 SA Real Estate Investor

www.reimag.co.za