Unit trust rules may stimulate growth

Posted On Thursday, 08 August 2002 02:00 Published by eProp Commercial Property News
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A number of changes to the structure and regulation of property unit trusts on the JSE Securities Exchange SA should stimulate growth in the sector, says Association of Property Unit Trusts chairman John Rainier.

 

Property-Housing-ResidentialThere has been huge growth in the property loan stock sector, which has accounted for the larger part of a 50% increase in market capitalisation across the listed property sector. The property loan stock sector has been boosted by new listings. They favour it because its loose regulation allows faster growth.

Rainier says that while many controls on property unit trusts remain, the new framework has added much-needed flexibility to the way trusts can do business.

Crucial changes to come through the Collective Investment Bill later this year include permitting property unit trusts to gear to levels of up to 30%.

The bill is also expected to enable property unit trusts to make offshore investments through direct and listed investments, which Rainier says will provide currency hedging opportunities.

'In this new environment, unless one is looking to establish a highly geared and hence more risky investment vehicle, I cannot see why new listings should adopt the property loan stock structure.'

Rainier predicts a swing back to secure property unit trusts.

The current debt profile of the property unit trust sector remains well below 30%, with a number of funds yet to exercise the right to gear. 'This lower debt in the rising interest rate environment is an advantage for property unit trusts relative to property loan stocks.'

Last modified on Tuesday, 22 April 2014 10:01

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