You’ve probably heard or read somewhere about SA REITs already. A few people know what they are but there are many people who have no idea what these are, especially those who have just started on the journey towards being Real Estate investors.
Well, SA REITs means South Africa’s real estate investment trusts. These are basically listed property investment vehicles in the South African context. They are similar to globally recognized REITs structures. They are known as Real Estate Investment Trusts and are normally in the form of companies or trusts that own, operate or finance income-generating real estate assets.
Opportunities SA REITs present include:
- Easy access to attractive and valuable real estate.
- Certainty on yearly returns because of the compulsory requirement that 75% of earnings should be distributed to investors annually.
- Diversified property portfolios exposure.
- Stable growing income return with inflation adjustment in most cases.
When you are an SA REIT investor, you get to own properties without directly having to deal with the administrative workload related to owning properties directly, which includes finding valuable properties, raising capital to finance properties acquisition and finding reliable tenants, among others.
SA REITs are typically managed internally or externally while trust REITs are managed externally.
The following are ways you could buy REITs stock:
- By buying shares of REITs directly.
- Through Mutual funds.
- Through Exchange-Traded Funds (ETF).
The South African Real Estate Investment Trusts Market
REITs in South Africa are listed in the Johannesburg Stock Exchange (JSE) with some seeking secondary listing with A2X, a recently launched stock exchange. Some SA REITs have primary listing in South Africa; while others seek secondary listing overseas or vice versa.
Johannesburg Stock Exchange has listing requirements which govern how the companies operate. At minimum, the following are some of the requirements that REITs should comply with…
A JSE-listed SA REIT requirements:
- “They must pay at least 75% of their taxable earnings available for distribution out to investors as dividends, giving investors certainty that net income will be paid out. “
- “REITs earn their income from property leases, which means that they usually have a relatively stable income stream, which is adjusted upwards annually to keep pace with inflation.”
- “Earn their income from commercial properties with long lease periods, which means that they usually have a relatively stable income stream, which is adjusted upwards annually to keep pace with inflation.”
- “There are required to have a committee to monitor risk.”
- “Above all Investors may face some degree of risk because economic and social situations are unpredictable may therefore positively or negatively impact rental income and the price of REITs.”
- “Foreign shareholders of SA REITs will be levied a dividend withholding tax from 1 January 2014. The current rate is 15%; or the applicable double tax agreement rate could apply.”
- “As a result gives the property company enhanced taxation efficiency because tax is payable by the end investor.”
You can read more on the Top 10 Biggest SA Real Estate Investment Trusts by clicking here, listed according to their market capitalization as of January 2019. You can also find a list of all 34 JSE-listed SA Real Estate Investment Trusts by clicking here. To see members of the South African Real Estate Investment Trusts Association, please click here.