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)
Recent Research Reports
Construction 2015: A review of South Africa’s construction sector (PDF Report)
Creamer Media’s Construction 2015 Report examines South Africa’s construction industry over the past 12 months. The report provides insight into the business environment; the key participants in the sector; local construction demand; geographic diversification;...
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
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.
This Week's Magazine
The international Square Kilometre Array (SKA) radio telescope – which is to be jointly hosted by South Africa and Australia with, later, outstations in other countries – may not yet exist, but international scientific working groups are already deciding what...
A free Web-based solar power plant capacity-planning tool offers project planners and developers, as well as governments, a means to assess the solar energy potential of thin-film solar PV power over an area of land. The tool was developed by thin-film solar...
As yet, no specific methodology, timeline or costs have been finalised to remedy the water ingress, excessive to contractual specifications, into the Gautrain tunnel between emergency shaft two (E2) and Park Station, says Bombela Concession Company technical and...
The “seriously disruptive” electricity outages in South Africa have cost packaging group Astrapak more than R2-million in “irrecoverable downtime costs”, the company said on Monday, adding that the power cuts were negating some of the benefit of energy saving...
Bakkies and more affordable cars dominated South Africa’s new vehicle market in 2014. Unaudited data from the Department of Trade and Industry (DTI) shows that South Africa’s most popular vehicle in 2014 was the Toyota Hilux, selling 37 562 units.