What are the benefits of investing in SA REITs?
Ian Anderson, Chief Investment Officer at Grindrod Asset Management, shares his reasons for investing in SA REITs.
First he considers SA REITs in relation to other asset classes.
SA REITs offer:
- A high level of current income compared with the bond market that is usually positive in real terms, or higher than the current consumer inflation, rate as well.
- Income growth at or above inflation over time.
- Capital growth at or above inflation over time.
- Diversification for an investment portfolio. Its correlation with the broader equity market is low at some 0.3% therefore adding REITs to an equity portfolio heightens return for the same level of portfolio volatility.
Then Anderson considers SA REITs in relation to other property investment vehicles and direct property investment.
SA REITs offer:
- Exposure to high-quality office, industrial and retail properties in one investment.
- Liquidity with the average monthly value of between R3 billion and R5 billion traded.
- Transparency with regular statutory reporting, analyst coverage, investor presentations and other important communication.
- No taxes paid in the vehicle itself.
- Oversight from the likes of the JSE, FSB, professional fund managers and investment analysts.
- Low transaction costs, especially compared with buying property in your own name.
- Diversification of investment assets, as most portfolios are geographically diverse and some offer exposure to a combination of office, industrial and retail properties.
- REITs enjoy a lower cost of capital – both debt and equity – supporting growth through acquisitions and development.
- Property and asset management is undertaken by professional managers, usually incentivised to enhance shareholder value through their participation in share options or share purchase schemes.
Grindrod Asset Management
CHIEF INVESTMENT OFFICER
+27 31 333 6677