South African REIT Association chairperson Laurence Rapp
The South African Real Estate Investment Trust (SA Reit) Association has published a best-practice guide book – Best Practice Recommendations (BPR) – in an effort to make the financial reporting of South African real estate investment trusts (Reits) clearer and more comparable.
In 2013, South African Reit legislation placed the listed property sector on par with similar investments worldwide. This ensured that the vehicle for monetising and listing property assets in South Africa was consistent with Reit structures internationally, making the sector more attractive for international investors.
In a statement released on Monday, SA Reit Association chairperson Laurence Rapp, noted that enhancing the financial reporting of the sector would result in greater transparency, consistency and comparability. “This plays an important role in attracting global flows of capital into the South African listed property sector,” he said.
SA Reit Association accounting and JSE committee chairperson Laurence Cohen added that legislation had been positive for the South African listed property sector and that publishing the first edition of the BPR signalled the sector’s commitment to providing a listed property structure that was uniform and well understood locally and internationally.
“It will assist in providing the market with clear, comparable and relevant financial reporting by Reits,” stated Cohen.
He explained that, while South African Reits were companies, they had particular nuances and ways of reporting that were unique to the sector. For example, while most companies measured performance by growth in headline earnings, the performance of a Reit was largely measured by growth in distribution per share.
“The BPR is a vital tool to guide Reits in achieving best-practice disclosure and reporting standards. It is also an important resource for the sector’s stakeholders – investors, analysts, financiers, media and others – to understand the sector overall, as well as the reporting of individual constituent counters,” said Cohen.
With this year representing first-time compliance with the BPR, he noted that some Reits would have to change the way they reported, in some areas.
“Notable changes to look out for are the reporting of cost-to-income ratios and the determination of revenue,” added Cohen.
The BPR was circulated to all SA Reit Association members on Monday.