Markets overrating REITS: Masholds MD

Gibson Mapfidza

Zimbabwe Stock Exchange listed property concern Mashonaland Holdings (Masholds) says it will not be investing in Real Estate Investment Trusts (REITS) in the near future.

A REIT is a regulated investment vehicle that enables the issuer to pool investors funds for the purpose of investing in real estate.

In exchange, investors receive units in the trust and beneficiaries share profits from the real estate assets.

But Masholds managing director, Gibson Mapfidza, told an analyst briefing on Wednesday that markets appeared to be overrating REITS.

Mapfidza, however, acknowledged that such assets also had significant advantages for investors.

“We don’t foresee us in the near future going into the REITS,” said Mapfidza, who was responding to a question on the effects of REITS on listed properties in Zimbabwe.

“There are inherent advantages that listed real estate still has as compared to REITS. If you look at our dividend payouts rate, it is very much compelling.

“The only issue is if we could give a dividend on a quarterly basis. Once we do that we will be able to match how a REIT does, but those are the key issues.”

He said the biggest advantage of a REIT was that firms had better access to cash flow.

The Masholds MD said REITS were in most cases regulated by government.

But he said this advantage had been oversold in the Zimbabwean market, disregarding the performance of the underlying asset.

“There is misconception that once you go into REITS you start making a lot of money. But it’s about the performance of the underlying asset. When you look at listed property, I know for certain in Zimbabwe and across the globe, our share prices tend to trade at a discount compared to net asset value. So that’s very much inherent of listed property. Yet when you look at the unit of a REIT, it’s very much related to the value of the asset,” he said.

“Unfortunately, in Zimbabwe, companies like ourselves are only able to participate in a REITS set-up through new developments. I think the minister was very clear in terms of guidelines.”

Mapfidza added that listed companies needed to know their strengths and ensure that going forward they grow on them.

He said his company was looking at Victoria Falls having made consultations with the Finance ministry.

The plan was to acquire land and bring an operator from the Middle East.

The new development would then be listed as a REIT.

“If you look at South Africa, they have five listed REITS. They still have growth points and those who are listed property companies as well. I think these entities can co-exist in a market without really trying to kill each other. I think that’s the misconception, that we should all have REITS. But it’s the about the performance of the underlying asset.”

The ZSE is anticipating more new capital markets products with the first REITS listing expected this year.

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