JSE to help property stocks keep their Reits status
Tough trading conditions and the lockdown are likely to hamper the sector’s ability to pay dividends as required
The JSE is in talks with the SA Reit Association, the voluntary body that represents the interests of listed property companies, to find ways to help cushion the industry from the negative effect of Covid-19.
In a letter sent to listed property companies and their corporate sponsors last week, the JSE said the outbreak of the Covid-19 pandemic had unforeseeable and unavoidable consequences for real estate investment trusts (Reits) that could affect their ability to comply with the JSE’s listings requirements.
Reits are obliged to pay out at least 75% of their distributable income to shareholders in the form of dividends (or distributions) within four months after a company’s financial year-end. Companies that don’t comply with these requirements stand to lose their Reit status.
However, already tough retail trading conditions, coupled with the impact of the government’s 21-day lockdown of non-essential businesses, are expected to have a detrimental effect on listed landlords’ rental income, which could curtail the sector’s ability to pay dividends to shareholders.
Reits that are exposed to shopping centres are especially at risk of losing income if tenants can no longer afford to pay rent. A number of Reits have in recent weeks already postponed interim dividends.
The letter reads: “The JSE is mindful of the material negative consequences to a business if it loses its Reit status solely due to its temporary inability, caused by unforeseen circumstances beyond its control, to comply with all of its obligations stated in the requirements. This will not only negatively affect Reit companies but will also have a detrimental effect on the JSE’s market and affect the rights and interests of shareholders and investors in Reit companies.”
As such, the JSE said it is having talks with the SA Reit Association to come up with solutions and recommendations to prevent property companies breaching their listing requirements.