New push for listed property change

Posted On Wednesday, 18 October 2006 02:00 Published by eProp Commercial Property News
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One of the advantages of REITs is their tax efficiency

Mike FlaxNigerian, which has a less sophisticated property and legal system than SA, is at least a year ahead in introducing a real estate investment trust (REIT) structure to the market.

Mike Flax, CEO of listed property loan stock company Spearhead Property Holdings and a member of the Property Loan Stock Association's committee, said on Monday there was now a "sense of urgency to introduce the system in SA".

He said the REIT structure was "catching on like wildfire around the world and, even in Africa, SA is being left behind".

Flax was at a REIT conference in Nigeria where he heard of the advanced plans for the introduction of a REIT structure there.

The Property Loan Stock Association, which represents 25 South African listed property loan stock companies, is one of the most vocal proponents of the REIT structure.

The leading REIT market is the US, with a $478bn market capitalisation and 159 listed REITs. Listed property companies in Europe have also adopted the structure and the UK is set to introduce it next year.

One of the advantages of REITs is their tax efficiency. The property company passes earnings directly to unitholders without paying corporate or capital gains tax. Unitholders pay tax on their gains.

Property pundits believe SA should consider adopting the globally recognised REIT structure to woo foreign investors.

Flax said the Nigerian government had approved the REIT structure and the first REIT listing was coming on to the Nigerian Stock Exchange next month.

"There is a sense of urgency to introduce the system in SA so that our listed property sector isn't continuously ignored by international investors. Our property market is more sophisticated (than Nigeria's). There is more choice and diversity, and the legal system underpinning the property sector (in SA) is first world," said Flax.

He said the correct REIT structure would attract foreign investors to SA.


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