South Africa to have Real Estate Investment Trusts (REIT) on JSE

The Johannesburg Stock Exchange, JSE, might boast about 30 real estate investment trusts (REITs) by this time next year, says Estienne de Klerk, chairperson of the SA REIT Association committee and executive director of Growthpoint Properties.

De Klerk’s comments come as the JSE prepares to officially host REITs for the first time at the beginning of next month. The REIT movement represents the establishment of a new tax regime for South African property funds which will make them comparable to their international counterparts.

This move comes after the amendment of relevant tax legislation last year and establishment of new JSE regulation for companies who want to become REITs.

Several JSE-listed property funds have already expressed eagerness to convert to the REIT structure. These include Growthpoint, the largest property fund on the JSE property sector. The sector boasts total market capitalisation of more than R200bn.

De Klerk said: “Because the SA REIT dispensation provides many benefits, the foremost of which is tax certainty, it is likely that all qualifying South African-listed property entities will make applications to the JSE to become a REIT.”

In statement released last week, the committee said the new structure makes for one of the most flexible REIT regimes internationally and was a significant development for South Africa’s publicly traded real estate sector.

Like existing listed property structures in South Africa, REITs own and operate income-producing commercial property.

The statement said more than 25 countries in the world use a similar REIT model such as the US, Australia, Belgium, France, Hong Kong, Japan, Singapore and the UK.

JSE business development manager Patrycja Kula said: “The REIT structure is in line with international best practice and having a globally understood structure will make our listed property sector much more attractive to foreign investors. The tax advantages of the new structure will also make the listed property sector much more attractive to local investors.”

“When South African-listed property funds convert to this system, South Africa will be the eighth largest REIT market,” Kula said.

De Klerk added that the SA REIT was flexible enough to adapt to various models while encouraging best practices and creating tax certainty.

De Klerk said South Africa had two forms of listed property investment entities – property loan stocks companies (PLSs) and property unit trusts (PUTs). - Sibonelo Radebe