SA REITS ON THE
GLOBAL STAGE
Local property counters to be assessed
on environmental, social and governance
impacts.
J
SE-listed real estate investment trusts
(REITs) will be subject to more international scrutiny, as REITs have been
included in US-based MSCI’s rating
on environmental sustainability, social
and governance (ESG).
South Africa’s REITs join the ranks of
over 5 000 publicly traded companies in
the world which are profiled on an ESG
rating tool.
The inclusion in the rating is part of
MSCI’s efforts to shed light on how risks
and opportunities are managed based on
industry specific issues. MSCI is a provider
of equity, fixed income and hedge fund indexes.
MSCI, which is listed on the New York
Stock Exchange says the key issues for REITs include green building investments and
green leasing at a property portfolio level,
corporate governance and human capital
deployment at a corporate level.
The JSE has close to 50 property companies listed, of which 31 have a REIT status and will likely be under the spotlight.
“South African institutional investors
may use the ESG rating to understand and
mange ESG-related risks of local REITs.
16 PROPERTY MOGUL ISSUE 2 – NOVEMBER 2014
They will also be able to compare South
African REITs’ ESG performance with that
of REITs in other countries,” MSCI says.
Furthermore, the inclusion will enable
an understanding of local REITs, which
will enable the inflow of foreign capital,
says chairman of the SA REIT Association
Laurence Rapp. “If we further attract international investors that will also drive down
the cost of capital.”
South African property companies
made their international debut in 2013 by
adopting the REIT structure to be in line
with international best practice.
The REIT structure gives local players an opportunity to compete in offshore
markets, as some listed property companies
say South Africa has limited opportunities
in terms of quality assets. This has forced
companies to forge ahead with their African and offshore strategies.
The REIT structure has various tax benefits, as companies are exempt from capital gains tax when property is sold. REITs
replace property loan stocks and property
unit trust structures, which many found
confusing, with complicated tax structures.
Investors also have a secured income
By Ray Mahlaka
stream, as REITs typically pay out at least
75% of their income as dividends to shareholders.
The world has taken stock of the REIT
dispensation. Some of the countries following the REIT structure include Ghana, Nigeria, Australia Singapore, Germany and
Hong Kong.
MSCI says institutional investors around
the world are considering the environmental, social and governance impact of their
investments.
This view has been supported by the
growth in the United Nations Principles
for Responsible Investment (PRI), which
has made the call for more responsibility in
investment processes.
PRI manages assets to the tune of $45
trillion, compared with $4 tri