My Property Fund
Why Property
The REIT fund invests in assests with exposure to all subsectors, albeit with a bias for retail. REITs with a holding in local assets are of greater interest to us, being the emerging market where we foresee growth and stability.
The unique structure of the SA REIT asset class provides two ways of beating inflation: capital growth and income distribution growth.
SA REITs give exposure to the best commercial properties in South Africa.
SA REITs exhibit both bond and equity characteristics with a regular cash distribution yield and income growth.
Investment in property are underpinned by lease agreements with tenants. On average, rents escalate at 7% per annum.
My Property Fund
My Property Fund is a retail offering of listed JSE property stocks. It is aimed at investment clubs or informal sector. The purpose is to assist local communities to access a sound and attractive investment opportunity in the many high quality REITs listed on our local market.
Groups or associations may open an account with Mavuso Capital, Mavuso will subsequently process an account with the stockbroking partner, FNB Stockbroking. FNB is the stockbroker and custodian for Mavuso Capital My Property Fund.
Local residents and other new market entrants will benefit from a mechanisim that accommodates their mutual financial assistance. The primary reason for the existence of saving clubs / stokvels, building wealth, can now be facilitated formally, safely and efficiently.
Investment Rationale
Transforming the township economy. (economic inclusion)
Property is a robust and growing asset.
To bring black people into the mainstream economy.
From consumption spending to investment spending.
Promoting financial literacy
Risk & Returns
This investment is a particularly strong case for investors seeking inflation linked returns. The fund invests in listed REITs, with a bias for the township-retail sub-sector. The risk/ return profile of such assets is superior to other asset classes, making it more conducive to new market entrants.
The graph below shows the composition of the SA Property Index Total Return since 1999. The resilience of the sector is demonstrated by a dividend yield that remained positive, and virtually unaffected by the global financial crisis of 2008/09.
Total Return Indexes
The market capitalisation of these institutions has grown tremendously over the decades to more than R 150 billion currently. REITs offer a number of benefits to investors. Namely, 75% of distributable income is guaranteed for distribution, among other things. In terms of risk management REITs are compelled to maintain a LTV of no more than 60%. The vast majority of the constituents of My Property Fund are managed at less than 40% LTV.
By investing in REITs, Mavuso Capital intends to bring such benefits to the local communities. Such REITs have the best of national tenants from the retail, industrial and residential sectors including banks, general retailers, fast food chains and leading hotels. Local communities now have the opportunity to be shareholders in such assets, with the added benefit of high quality asset management.
However, the benefits of such an exercise go beyond the local community. A more inclusive economy is created, where black investors are brought into the mainstream economy as shareholders of some of the most valuable assets on the market.
For the discerning investor, it is worth noting that although the capital appreciation is often higher than the yield, this yield is virtually always equal to or greater than the prevailing rate of inflation, and significantly less volatile. This is largely a result of the sector’s performance and its regulation. Within the retail sub-sector, a significant portion of this performance has been due to the burgeoning growth in the local retail market, due to changes in South Africa’s socio-economic environment.
The Flow Process
Retail Clients
- Savings Clubs
- Individuals
- Local residents
- Constitution
- Signed mandates
- Monthly premium
Mavuso Capital
- Regulated FSP
- Fund manager
- Sector analysis
- Reporting to investors
- Emerging market focus
REIT Fund
- FNB Stockbroking
- Custodian
- Individual accounts
- Independent Administration
Assets
- Listed REIT Fund
- Existing/ income producing assets
- Regulated market (JSE)
- Professional property management
- National tenants
- Half-yearly dividends
The Basic Fund Structure
Mavuso Capital is presenting a property investment opportunity to the retail market.
Each group shall appoint 3 representatives, authorised to act on behalf of the group. A letter of authorisation is to be presented.
A lock-in period of 3 years shall apply to the investment. No withdrawals may be made during this period.
Reporting on fund accounts shall be to the group representative (secretary, chairman etc.)
Group Contributions
Each group contributes a minimum of R 5 000 per month. (A once-off account opening fee of R 120 per person, is payable.)
Each group shall have the discretion to decide on the contribution amount above the minimum (in R 250 lots). This amount is subsequently fixed for the year.
To acknowledge membership to the fund, each group receives a monthly statement (reporting).
Each group shall sign a mandate with Mavuso Capital (FSP) to purchase shares on its behalf, and on going management at FNB Stockbroking (corporate mandate).
Fund Rules
Each group must have a minimum of five (5) members.
The fund shall only recognise the group as the investor, not each individual member.
Each group shall present its founding constitution and sign a mandate on account opening.
A lock-in period of 3 years shall apply. Investors may not redeem or sell their shares during this period.
Post the lock-in period, the investor may sell their shares via the fund manager, Mavuso Capital.
The fund manager shall report to the investors on a monthly basis.
Dividends payable to investors may be withdrawn after the lock-in period, and not at any time before.
Is Mavuso Capital licensed to manage investments?
What is a REIT?
How does a company qualify as a REIT?
Why invest in a REIT?
Owning shares in a REIT allows investors to earn a part of the income produced through the underlying “bricks and mortar” without being responsible for managing the property.
There are many other benefits to investing in REITs including their regular income stream and special tax considerations.
What are the investment benefits of a REIT?
How could the changes in the level of interest rates affect the performance of JSE listed REITs share prices?
With respect to changes in the level of interest rates, many asset prices usually rise (or fall) as the immediate response to a decrease (or increase) in the level of interest rates. This is especially true for assets with future cash flows that are fixed, such as the interest payments from bonds having fixed coupons. If future cash flows are not expected to rise, then increasing interest rates would have a clear negative impact on asset values, including the share prices of listed REITs.
However, changes in the level of interest rates often reflect changes in the level of economic activity, with stronger economic activity often accompanied by growing demands for credit and rising interest rates. In particular, the historical record reveals that share prices of listed equity REITs have more often increased than decreased during periods of rising interest rates. The more frequent occurrence of higher equity REIT share prices during periods of rising interest rates often reflects higher earnings, as an economy that generates stronger earnings is often also accompanied by higher interest rates.
How to invest in REITs.
What are the various REITs sectors?
REIT FAQs
When were REITs established in South Africa?
The new dispensation was introduced through the amendment of the tax legislation and the JSE listing requirements. Considering the introduction of special taxation rules in respect of the taxation of REITs vs PUT and PLS, the JSE was requested to facilitate the introduction of the REIT structure and regulations.
With effect from May 1, 2013, a REIT is regulated by the JSE listing requirements and rules.From this date, PUTs were automatically considered to be REITs (Trust REIT) and listed on the JSE REIT board. PLS can adopt the regulatory framework set out by the JSE to qualify to list on the REIT board of the JSE. The new dispensation does not apply to an unlisted PLS.
Who manages the assets of REITs?
Can South African REITs invest in other countries?
A REIT may only make a property investment in a country if it has a foreign currency sovereign rating by a rating agency. Currently, the requirement is a rating of ‘Baa2’ or higher by Moody’s Investors Service Limited, or ‘BBB’ or higher by Standard and Poor’s or by Fitch Ratings Limited. Where the country has been rated by more than one agency, the lower of the ratings applies.
Who regulates REITs?
A REIT that is a South African resident for income tax purposes qualifies for the REIT tax dispensation. It can be a listed Company or a property portfolio of a collective investment. The listing requirements of an exchange must, per the current wording of section 11 of the Financial Markets Act, be published by the Financial Sector Conduct Authority (FSCA).
In February 2020, South Africa’s Minister of Finance delivered the 2020 Budget Review. As part of the review, it was indicated that the definition of a REIT as per the Income Tax Act needs to be updated to be in line with the Financial Sector Regulation Act (2017). In addition, it is proposed that the consultation requirements regarding listing criteria on an approved exchange should be reviewed.
SAREIT is actively participating in the consultation process.