The introduction of REITs to the South African property market: Opportunities for fund managers

摘要

On 1 May 2013, real estate investment trusts (REITs), a listed propertyudproduct, had legislation about it introduced in the South African propertyudmarket. Prior to the introduction of this REIT legislation, property unit trustsud(PUTs) and property loan stocks (PLSs) were the two predominant types ofudlisted property investment products in South Africa. However, both the PUTudand PLS are subject to uneven regulation and taxation, and they lackudflexibility.udThe REIT legislation was introduced to eliminate some of the problems of theudPUTs and PLSs, by creating: a more unified tax treatment of listed propertyudcompanies, more stringent regulatory requirements and uplifting the SouthudAfrican property market to a level that is internationally competitive. It isudtherefore considered valuable to empirically investigate whether or not theudintroduction of the REIT framework into the listed South African propertyudmarket will be advantageous to investors, and whether or not it would lead toudimprovement in the efficiency, regulation and taxation of the listed propertyudmarket.udA questionnaire was used to collect primary data to analyze the researchudproblem. The questionnaire used a Likert scale format that consisted of 20udquestions. There were a total of 58 useable respondents, each of who fell intoud1 of 5 occupational categories. The questions were divided into 4 unifyingudthemes and the findings were analyzed according to these themes.udFrom the analysis of the responses it was found that the REIT legislation isudperceived as a welcomed and suitable introduction to the South African listedudproperty market. We could also infer that REITs allow for a more favorable taxuddispensation, improved regulation, increased international competitivenessudand enhanced liquidity within the listed property market. Overall, there is audperception that investors, especially fund managers, would find it potentiallyudadvantageous to include South African REITs or a higher proportion of suchudREITs in their investment portfolios.