Feb 23, 2012
Growthpoint in discussions with Treasury on Reit legislationBack
Cape Town|Engineering|Johannesburg|Africa|Growthpoint|Real Estate Investment Trust|Rental|Africa|South Africa|Listed Property|Estienne De Klerk|Norbert Sasse|Pravin Gordhan
© Reuse this
De Klerk, who is the chairperson of the Property Loan Stock Association, added that significant progress has been made on the proposed Reit regulations, as well as finding an appropriate regulatory framework and efficient Reit structure for South Africa.
Finance Minister Pravin Gordhan said in his 2012 Budget speech on Wednesday that the Treasury would bring the governance and tax treatment of property loan stock entities in line with the present treatment of regulated property unit trusts.
The Treasury explained that rental income from property loan stock entities would fall under the pass-through regime that applied to property unit trusts.
Property unit trusts and property stock loan companies typically provide a commitment to distribute a minimum of 90% of their rental income to investors. The distribution of rental income is effectively tax-neutral in the hands of the property trust. The Treasury said property loan stock companies appeared to achieve roughly the same result but without official sanction.
“They issue investors a dual-linked unit that consists of a debenture and a share with the distribution in the form of interest. The dual-linked structure needs to be eliminated so that other entities do not undertake the same structure to avoid tax by relying on excessive debt,” it stated.
De Klerk told Engineering News Online that the Reit legislation would rebrand property loan stock companies and property unit trusts so they would be recognised as Reit companies under the Tax Act.
“This means that these entities will be exempt from capital gains tax.
“The new South African Reit structure will yield many benefits such as offering tax certainty and efficiency relating to distributions, which will be recognised as rental from a taxation point of view, therefore their income will retain its major,” he said.
This followed the National Treasury’s announcement last year after the implementation of the Tax Amendment Bill in April of its intention to finalise the Reit legislation before 2013.
The bill raised the priority of Reit legislation.
Meanwhile, Growthpoint CEO Norbert Sasse stated at the company’s interim results presentation in Johannesburg that above-inflation increases in electricity, rates, taxes and other administrative costs remained a concern.
Sasse said that access to liquidity was expected to remain good with strong demand for the company’s corporate bonds and equity, as well as a willingness by, among others, all the major banks to provide debt facilities to Growthpoint.
The company also anticipated its V&A Waterfront property portfolio in Cape Town would deliver over 7% return on cost of developed properties in line with its due diligence forecast.
Further, he noted that the overall vacancy factor is unlikely to reduce much below the current 4%, with negative rent reversions in the office sector unlikely to change until such time as national office vacancies across all grades start to improve.
The company reported a 6.1% distribution growth to 67.8c a linked unit, which was in the upper end of the guidance previously given to the market.
The company also reported an increase in revenue to R2.68-billion from R2.23-billion in the previous corresponding period.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Article contains comments
Updated 7 hours ago Trade union Solidarity warned on Wednesday that ongoing restructuring and retrenchments in the information and communication technology (ICT) industry continued to put employees in the sector under “immense” pressure. This as the union claimed it had received...
Updated 7 hours ago Directors of investment holding company Combined Motor Holdings (CMH) say they are satisfied with the results achieved in the six months ended August 31, during which time the local economic environment continued to battle impediments to growth and national dealer...
Updated 7 hours ago In the Medium-Term Budget Policy Statement Finance Minister Nhlanhla Nene has outlined concrete plans to consolidate South Africa’s pubic finances and restore macroeconomic balances. The proposed adjustments – lower than planned spending and increased tax revenues -...
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
This Week's Magazine
The broad-based black economic-empowerment (BBBEE) alignment process in the con-struction sector has begun, dur-ing which the sector codes of the Construction Sector Charter Council (CSCC) will be aligned with the revised Codes of Good Practice (CoGP), which come...
It is second time lucky for Toby Venter. Ten years ago he negotiated to buy the Kyalami racetrack, but “the deal did not materialise”.
Environmental solutions company I-Cat started construction work on its R22-million, 1 949 m2 environmentally sustainable office and warehouse facility, commissioned by I-CAT Environmental Solutions, at a launch event in October. The new sustainable I-CAT campus,...
Effective file synchronisation and sharing across an organisation’s structures can provide the basis for robust mobile-device and document management while maintaining proper backup, version control and content distribution. These are the lessons learned by complex...
Hotel group Carlson Rezidor currently holds the largest hotel pipeline in Africa with 30 hotels and 6 300 rooms under development. The hotel group develops and operates Radisson Blu in the upper upscale segment and Park Inn by Radisson in the mid-market segment. With...