Property firms in talks with JSE over Covid-19 and Reit status
The bourse is monitoring SA real estate investment trusts and their listing requirements amid the pandemic
The R470bn listed property sector is in talks with the JSE about how certain listing requirements could be suspended in light of the effect Covid-19 pandemic has had on real estate across SA.
“The JSE is in active discussions with the SA Real Estate Investment Trust (Reit) Association, which is expected to highlight the challenges faced by the Reit sector and propose possible solutions and/or recommendations,” the bourse said on Thursday.
The JSE said it will continue to work closely with the association to determine what role it can play, in line with the listing requirements.
Most listed property companies are Reits, which have to pay at least 75% of their distributable income as dividends. That income is effectively taxed in the hands of the shareholders, not the companies. The tax dispensation is the main reason so many SA real estate companies have become Reits since late 2013 when it was introduced.
Furthermore, at least 75% of distributable income must come from traditional rent. If these and certain other rules are broken, companies risk losing their Reit status.
However, many SA Reits have battled over the past two and a half years, with weak economic conditions making it difficult to grow rental rates. Rising municipal rates and taxes have also made it difficult for funds to grow their dividends at consumer inflation-beating rates.
Some Reits have battled to pay finance costs attached to high debt levels.
Since the coronavirus hit SA more than a month ago, many Reits have withdrawn dividend guidance, while some have put dividend payments on hold.
The JSE said it encourages issuers and sponsors to carefully assess the effect of the Covid-19 pandemic on the issuers’ businesses. “They should immediately engage with the JSE if there are any concerns about their continued ability to comply with the requirements, and how that would affect their Reit status.”