Property sector needs ’global brand’

Posted On Tuesday, 15 August 2006 02:00 Published by eProp Commercial Property News
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There is overseas investor interest in SA’s commercial real estate market, and the adoption of the internationally accepted Real Estate Investment Trusts (Reits) structure by the local listed property sector could create opportunities to attract foreign investors.

John Kriz ReitThis is the view of John Kriz, the MD of real estate finance for rating group Moody’s Investors Services.

New York-based Kriz, who will be speaking at a Reits conference hosted by the Property Loan Stock Association tomorrow and on Thursday at the Sandton Convention Centre, said Reits had proved to be a “very successful vehicle” in the US and other countries where it had been adopted.

“Reit is a global brand name people respect, and there is value in that,” he said. Kriz said there was a “tidal wave of cash in the world looking for a home”.

“There are definitely opportunities for South African property companies to attract foreign investors.” Kriz said investors from the US and other countries were looking for investment opportunities in property and in SA.

Reits created financial flexibility, a more stable business environment, transparency as well as liquidity. The Property Loan Stock Association, which represents 25 JSE-listed property loan stock companies, is hosting the conference to garner support for the adoption of the structure in the country.

The leading Reits market is the US, with a $478bn market capitalisation and 159 listed Reits. Listed property companies in Europe have adopted the structure and the UK will introduce it next year. The association said it realised if the listed property sector was to become recognisable to international investors, it had to take on an identity in line with international trends and standards.

SA is one of the few countries with a listed property sector that has not adopted the structure.

The Property Loan Stock Association says Reits combine the best of property unit trusts and property loan stock companies. A Reit has an unlimited borrowing capacity, as does a local property loan stock company, whereas a property unit trust can borrow only up to 30% of total assets. Like a property unit trust, a Reit does not pay capital gains tax, whereas a property loan stock firm does.

It, like a property loan stock firm, can invest in a listed property company. A property unit trust may not. The association believes a property unit trust and property loan stock company could be converted to a Reit.

Last modified on Tuesday, 06 May 2014 09:19

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