REITs evolve as viable investment instrument
THE real estate investment trust (REIT) is steadily evolving as a viable alternative capital market investment instrument in Zimbabwe, amid indications the market has the potential to grow into a US$40 billion sector.
A REIT is a company that owns and typically operates income-producing real estate or related assets, for which units of an investment pool are created and sold to investors in the same way as company stocks.
In 2029, the Government gazetted Statutory Instrument 240, subsequently published in the Finance Act No. 2 of 2020, paving the way for registration of various investment schemes with the Securities and Exchange Commission of Zimbabwe (SecZim), such as exchange-traded funds, as well as REITs.
The Tigere REIT pioneered the listing of REITs on the domestic market last November, with the National Railways of Zimbabwe Contributory Pension Fund’s Revitus REIT set to become the second listing on December 15, 2023.
To advance the market, the Zimbabwe Stock Exchange (ZSE) and the private sector formed the REITs Association of Zimbabwe to spearhead the development of the market.
In an interview, REITs Association of Zimbabwe chairperson Dr Mike Juru said while seven REITs have been licensed by the SecZim since the introduction of the tax incentives, only one has been listed to date, which is the ultimate stage for the attainment of REIT status.
“We recently had another potential REIT (Revitus), which is progressing well. REITs have immense potential to accelerate the country’s infrastructure development drive and, in the process, grow the economy through regulated investment channels and foster employment creation,” he said.
He indicated that the slow pace of listing was partly due to challenges encountered in implementing the set conditions, as well as some challenges in putting together an attractive REIT offering for investors in the capital market.
Dr Juru said his vision for the REITs market in Zimbabwe was a mirror of the shared national vision of achieving upper middle-income economy status by 2030.
“I envision the development of sustainable, world-class infrastructure in Zimbabwe, leveraging on REITs. For existing infrastructure, I foresee an increased appetite for repurposing existing commercial and residential properties in response to changing user needs. This envisioned trend is in line with the age-old real estate mantra: Fit for purpose,” he said.
Dr Juru said Zimbabwe’s documented residential and commercial infrastructure needs, coupled with the attractive investor returns, present a compelling business case for the broader market to take up REITs as a viable capital market instrument. The Revitus REIT, to be listed through an initial public offering (IPO), is currently in the market to raise about $45 billion at the close of the offer on December 7, 2023.
The REIT, managed and administered by
Datvest, has five of its buildings under the portfolio, namely, Africa House and Pioneer House in Bulawayo; and Atlas House, Charter House and Electra House in Harare.
According to Dr Juru, considering that REITs are still in their formative stages in Zimbabwe’s capital market, he is convinced the performance of REITs is primed for further improvement in the short to medium term.
“By their nature, REITs are the fragmented shareholding of many investors in a larger property portfolio; therefore, this gives REITs the much-needed value stability synonymous with property investments,” he said.
He added that REITs were highly regulated to the extent that a specific portion of their earnings is compelled by law to be paid out as dividends; hence, this guarantees investor returns.
“The listing of REITs on the stock exchange promotes transparency, and the fact that REITs can be traded like shares makes them a flexible investment option that can easily be liquidated for cash. It is these innate characteristics that make REITs an attractive investment option, even in an inflationary environment,” said Dr Juru.
He said considering the association has a shared vision of making Zimbabwe great again through actualising Vision 2030, it continues to engage with the authorities to make the tax environment fair and attractive to both local and international investors in this strategic market segment of infrastructure development.