CAPE TOWN - ZAR X, one of the licensed stock exchanges in South Africa, has listed its first real estate investment trust (Reit), Runway Property Group, following changes to the Tax Act that frees Reits from having one option for listing.
Previously, the prevailing perception was that a Reit would need a portfolio of R10-R20billion to list, and in terms of the Income Tax Act it was required to list on the JSE.
However, this excluded small to medium-sized property portfolio owners and entrepreneurs from being able to use shares as a way to raise capital, and forced them to use more expensive bank finance instead.
A change to the Act last year has freed Reits from having only one option for listing, Etienne Nel, the chief executive of ZAR X, said in an interview yesterday.
“Runway Property Group’s listing with us proves that a property portfolio from a billion rand upwards can be listed very cost effectively and still qualify as a Reit,” he said.
In addition, because of policy discussions around property ownership in South Africa, banks were requiring more collateral for new transactions. This was having a negative impact on the property market. By enabling listing of mid-tier Reits, ZAR X was creating an alternative, less costly avenue through which Reits could fund transactions. This would have a confidence-building impact on the property market as an asset class, he said.
Runway Property Group chief executive Earle Marks said the ease of listing on ZAR X was a significant factor in the decision to pro-actively use funding options as a means to further enhance value for shareholders.
“Listing on ZAR X gives us a way to cut the costs of raising capital by using shares as future acquisition currency. It’s a business opportunity we couldn’t afford to miss out on,” he said.
Runway Property Group’s portfolio includes the Ferndale Village Shopping Centre, Primrose Square Shopping Centre, Dowerglen Plaza, Noordheuwel Shopping Centre, Cramerview Village Centre and Norbuy Office Park, in Gauteng.
Nel said ZAR X had several other property entrepreneurs in its listing pipeline, with possible two to three additional listings within four months.
Providing new mechanisms for the capital markets was one of the principles on which the fintech ZAR X was founded.
In October 2019, ZAR X announced the country’s first ever blockchain trading platform for unit trusts, which made the process of directly buying and selling a range of unit trust funds easier and more efficient. Some 60 unit trust funds were expected to be listed on the exchange in due course, as well as a money market fund, he said.
In November, ZAR X was the first of South Africa’s new stock exchanges to do an inward listing - with Dale Capital, a Mauritius-based private equity investment holding company focused on food security. The company was experiencing better trade in its shares on ZAR X than on the Mauritius exchange, he said.
Also in November, ZAR X listed TIP One, to enable tradeability of broad-based black economic empowerment shares in schemes across all market segments.