Jargon buster: Reits

A Reit (pronounced “reet”) is the abbreviation for a Real Estate Investment Trust.

The Reit structure is becoming an international standard as property investment globalises and exists in countries like the US, Australia, Belgium, France, Hong Kong, Japan, Singapore and the UK. The Reit structure is a tax regime that provides “flow through” on a pre-tax basis of the net property income after expenses and interest to unit-holders.

The South African listed property sector has delivered attractive returns in recent years, but neither of the current structures — Property Loan Stocks (PLS) or Property Unit Trusts (PUT) — offers international investors the uniformity and simplicity that facilitates international investment.

The introduction of a best-of-breed Reit structure, comparable with established structures internationally, is currently being formalised with the National Treasury, Property Loan Stock Association and Association of Property Unit Trusts. This would provide for a conversion process allowing existing property investment vehicles to choose to convert to a Reit structure.

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