A Real Estate Investment Trust (REIT) is a company that derives income from the ownership, trading, and development of income-producing real estate assets. In South Africa, a REIT receives special tax considerations and offers investors exposure to real estate through shares listed on the Johannesburg Stock Exchange (JSE).
A Real Estate Investment Trust (REIT) is a company that derives income from the ownership, trading, and development of income-producing real estate assets. In South Africa, a REIT receives special tax considerations and offers investors exposure to real estate through shares listed on the Johannesburg Stock Exchange (JSE).
Listed real estate allows anyone, from individual investors to large institutional investors, to gain access to the underlying assets of publicly traded companies by purchasing shares.
Owning shares in a REIT allows investors to earn a part of the income produced through the underlying “bricks and mortar” without directly owning and managing the property.
There are many other benefits to investing in REITs including their regular income stream and special tax considerations.
There are various ways for individuals and institutions to invest in REITs listed on the Johannesburg Stock Exchange. These include direct ownership of REIT shares, investing in property unit trust funds and through buying shares in a property index tracker fund. Banks, stockbrokers, or financial advisors should assist you with the most suitable options for your financial position and goals.
REITs invest in the majority of real estate property types, including offices, residential buildings, retail centers, industrial facilities and hotels to name a few. Most REITs focus on a particular property type, but some hold multiple types of properties in their portfolios.
In the South African context, REITs did not exist until April 1, 2013. However, comparable investment vehicles included Property Unit Trust (PUT) or a Property Loan Stock Company (PLS company).
The new dispensation was introduced through the amendment of the tax legislation and the JSE listing requirements. Considering the introduction of special taxation rules in respect of the taxation of REITs vs PUT and PLS, the JSE was requested to facilitate the introduction of the REIT structure and regulations.
With effect from May 1, 2013, a REIT is regulated by the JSE listing requirements and rules.
From this date, PUTs were automatically considered to be REITs (Trust REIT) and listed on the JSE REIT board. PLS can adopt the regulatory framework set out by the JSE to qualify to list on the REIT board of the JSE. The new dispensation does not apply to an unlisted PLS.
No prescribed management model is enforced as to how a Company REIT is managed internally and externally. Company REITs may have external or internal management and/or property administration function. The company’s directors are responsible for the ongoing compliance with the JSE listing requirements and the Companies Act.
Yes. A material portion of the SA REIT sector is invested across a wide range of international markets.
A REIT may only make a property investment in a country if it has a foreign currency sovereign rating by a rating agency. Currently, the requirement is a rating of ‘Baa2’ or higher by Moody’s Investors Service Limited, or ‘BBB’ or higher by Standard and Poor’s or by Fitch Ratings Limited. Where the country has been rated by more than one agency, the lower of the ratings applies.
Since 2013, REITs are regulated by the JSE listing requirements and rules. The REIT’s directors are responsible for the ongoing compliance with the JSE listing requirements and the Companies Act.
A REIT that is a South African resident for income tax purposes qualifies for the REIT tax dispensation. It can be a listed Company or a property portfolio of a collective investment. The listing requirements of an exchange must, per the current wording of section 11 of the Financial Markets Act, be published by the Financial Sector Conduct Authority (FSCA).
