Real Estate Investor Magazine South Africa September 2014 | Page 53

COMMERCIAL

property as a substitute for bonds and equities, but
listed property is an asset class in its own right, which
has outperformed equities, bonds and cash over the
long term.
Investors should not underestimate the importance
of a long-term perspective when investing in property
– whether directly or via REITs. In order to correctly
assess the performance of an asset class and to
understand the true nature thereof, investors need to
look at the 1, 3, 5 and 10-year performance.
The true nature of listed property as an investment
lies not only the regular income pay-outs, but also the
long-term benefits of capital appreciation. Behind
each REIT are its physical property investments,
but also much more. REITs are quality companies
with clearly defined investment strategies, good
governance, entrepreneurial flair and innovative, expert
management teams.
Q: What do you believe are the most important issues investors
should be considering when investing in REITs?
LR: As with any other investment, investors should do
a thorough due diligence before making an investment
in a specific REIT. These are some of the questions that
must be asked.
• What yield the fund is trading at?
• What is the management’s forecast for growth?
• What are the fund’s plans and prospects for the
future?
• What track record does the fund have? Has the fund
historically delivered on its plans and forecasts?
• How long has the fund been trading and how has it
managed through difficult cycles?
• What level of experience and expertise does the
management have?
• What exposure does the fund offer to different
sectors? Is the exposure highly diversified or is it
concentrated on a specific sector?
• What level of gearing applies? How much debt is
the fund exposed to?
• What is the fund’s interest rate policy? Is the fund
hedged against this risk?
• How much liquidity do the shares offer, ie how easy
is it to trade in and out of the shares?
• What level of foreign currency exposure does the
fund offer? Given the weak rand, foreign currency
exposure could yield significant benefits in the
current market.
• What is the fund’s tenant exposure? Who are the
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fund’s tenants and how exposed is the fund to
individual tenants?
• What is the concentration of assets within the fund?
Are the assets diversified or are there only a limited
number of assets?
• When and how does the fund pay out distributions?

LAURENCE RAPP SA REIT
CHAIRMAN AND CEO OF VUKILE
PROPERTY FUND
Laurence Rapp has been appointed Chairman of the SA REIT
Association, which represents the South African listed REIT sector
on the JSE. SA REIT members comprise all listed SA REITs and
represent around R230 billion worth of real estate assets. Rapp
takes over from the association’s Founding Chairman, Norbert
Sasse, who is CEO of Growthpoint Properties.
Rapp’s passion for finance and property will find a valuable
outlet at SA REIT Association. He is also CEO of Vukile Property
Fund and has extensive experience in the financial services
environment spanning investment banking, private equity, retail
banking and insurance and asset management. He was previously
a director of Standard Bank having headed the Insurance and
Asset Management division and, prior to that, was in charge of
the Strategic Investments and Alliances Division. Rapp is also
immediate past Chairman of the SA REIT Association Marketing
Committee.
September 2014 SA Real Estate Investor

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