THOUGHT OF THE WEEK What is a reit?
Updated: Apr 7, 2020
REITs, or real estate investment trusts, are companies that own or finance income-producing real estate in a range of property sectors. These companies have to meet certain requirements to qualify as REITs. Most REITs trade on the major stock exchanges and own several kinds of commercial properties in SA, such as warehouses, factories, hospitals, shopping centres, office buildings and, to a lesser extent, residential properties. Some also invest in properties overseas.
A JSE-listed SA REIT must inter alia:
Own at least R300 million of property;
Keep its debt below 60% of its gross asset value;
Earn 75% of its income from rental or from property owned or investment income from indirect property ownership; and
Pay at least 75% of its taxable earnings available for distribution to its investors each year.
One advantage of REITs is that they are not subject to capital gains tax (CGT) on the disposal of immovable property, or shares in a ‘property company’.
For more information on the above, please contact our Professional Staff.