Real Estate Investor Magazine South Africa Real Estate Investor Magazine - November 2017 | Page 39

least 75% of the total distributable profits of the REIT must be
distributed by no later than four months after its financial year
end. Most REITs will often pay their annual distribution in the
form of an interim and final distribution. Borrowings are also re-
stricted to 60% of asset values.
One of the most significant differences of a REIT to listed
equity investments is that distributions made by a REIT are made
out of before tax income. Whilst the dividend that an investor
receives from a REIT is not subject to the 20% dividends tax, it
is fully taxed as income. Upon disposal of one’s investment, and
when a REIT unit is disposed as a capital asset, the net proceeds
will be subject to capital gains tax. The largest REIT listed on the JSE is Growthpoint with a
market capitalization of R70 billion. Its flagship property is the
investment in the V&A waterfront. Growthpoint recorded a
6.5% growth in dividend per share. Recently Equities Property
Fund, a specialist industrial logistics property REIT, reported a
12% growth in its interim distribution.
It is important to note that investors do still face some risk
with a REIT. These include exposure to vacancies, defaulting
tenants and pressure on rental growth coming from the weak
economic growth forecasts and competition for rental tenants.
For those REITs with exposure to offshore property the effect of
exchange rate differences are also a factor.
TYPES OF SA REITS Trust REIT
All SA REITs own income-producing property. Prior to SA
REIT legislation there were historically two forms of listed prop-
erty investment entities in South Africa: property loan stocks
companies (PLSs) and property unit trusts (PUTs). Both were
able to adopt the REIT regulatory framework set out by the Jo-
hannesburg Stock Exchange ( JSE).
The structure is flexible and allows SA REITs to be managed
internally or externally, and caters for different equity structures
that may exist, such as A- and B- linked units that have different
rights that existed in some property loan stock companies.
Company REIT
• In a Company REIT shareholders are active participants.
They enjoy the full protection of the Companies Act and
Takeovers Regulations Panel. They can vote on specific issues
in a general meeting. Shareholders vote for the company to
be a REIT
• The company has the REIT structure recorded in its memo-
randum of incorporation
• Company directors are responsible for its ongoing compliance
with the JSE's listing requirements and the Companies Act
• Companies can have external or internal management and/or
property administration
• An existing PUT will become a SA REIT upon application
to the JSE and after providing evidence of its compliance with
the JSE Listing Requirements and that it is registered with
the Registrar of Collective Investment Schemes
• Investors' interests are protected by a trust deed and the trustee,
whose role it is to ensure compliance with the Collective Invest-
ment Schemes Control Act and to safeguard investors’ assets
• The Trust REIT needs to meet all JSE listing requirements
but are not subject to the Takeovers Regulations.
• Trustees report to the Registrar and must meet all the require-
ments of the Collective Investment Schemes Control Act.
• Must have an external asset and property manager in terms of
the Collective Investment Schemes Control Act.
SA reits invest in all types of property
Most SA REITs own several kind of commercial properties like
shopping centres, office buildings, factories, warehouses, hotels,
hospitals and even, to a lesser extent, residential properties, in cit-
ies and towns across the country. Some even invest in properties
in other countries.
SOURCE
SA REIT Association
SA Real Estate Investor Magazine NOVEMBER 2017
37