THE assets in which listed property unit trusts can invest have been broadened, effectively levelling the playing fields between these property funds and listed property loan stock companies.

This change is also a further step towards property unit trusts becoming real estate investment trusts (Reits).

SA’s listed property industry is in the process of moving towards adopting a Reit structure similar to the ones in the US and UK, to make it more globally competitive.

In terms of the Collective Investment Schemes Control Act, property unit trusts were previously allowed to invest only in fixed property and offshore listed property shares.

Property unit trusts were not allowed to invest in domestic listed property counters whereas listed property loan stock companies did not have any of these limitations.

Craig Hallowes, spokesman for the Association of Property Unit Trusts, says the registrar of collective investment schemes is now letting property unit trusts invest in domestic listed property counters. This will put property unit trusts on a more equal footing with property loan stock companies.

“There are restrictions in that the investment cannot exceed 25% of the value of the property unit trust making the investment,” says Hallowes.

Also, one single investment cannot be more than 10% of the property unit trust’s value.

He says previously property loan stock companies were able to be more competitive, as they were able to invest in a combination of listed property shares and direct property “when the one was trading at a relative discount to the other”.

Hallowes says new Reit legislation, which is expected to be finalised and implemented in the 18 months, will let property companies listed in SA or Reits invest in direct and listed property offshore and onshore.

“However, there will be certain restrictions on the size of the investments made and which stock exchanges can be invested in, as well as the make up of the income from the listed stocks invested in,” he says.

Source: Business Day