What is the difference between a PUT, a PLS and a REIT?
A PUT (property unit trust) is a collective investment scheme in property and is governed by the Collective Investment Schemes Act and the FSB (Financial Services Board). PUTs have tax certainty and the income distributed to unitholders is not taxed in the PUT. It retains its nature and is taxed in the hands of the unitholder according to their tax status.
A PLS is a property loan stock company (also called a VLS or variable loan stock company), which has a share linked to a variable rate debenture. PLS’s have fewer restrictions than PUT’s (for instance gearing is unlimited and they can invest in other companies), but they do not have tax certainty.
A REIT is a Real Estate Investment Trust and is a term used worldwide for Real Estate investment vehicles, although legal structures differ widely around the world. REITs are generally characterized by tax certainty and the flow through of income to investors.
South African PUTs are recognized as REITs and are included in Ernst and Young’s annual Global REIT report and are included in the Dow Jones Wiltshire Global REIT index. Certain PUTs are also included in the MSCI REIT index.
South Africa is currently working towards a common REIT structure and a the first discussion paper was circulated during December 2007.
How does one invest in SA Corporate Real Estate Fund?
SA Corporate shares are purchased as you would any other share listed on the JSE Securities Exchange SA. Orders to purchase are placed with your stock broker. There is no minimum payment and you can not purchase shares with a monthly debit order.
What is the minimum monthly payment for an investment in PUTs?
PUTs are purchased in lump sums for a minimum of 100 shares, as you would purchase shares in any other company listed on the JSE. There is no minimum payment, and you can’t purchase PUTs with a monthly debit order – although this can be achieved through investing in any one of a number of unit trust flexible property funds that invest exclusively in listed property vehicles.
Where do I monitor the performance of PUTs?
The prices of PUTs are quoted on the JSE pages of most daily newspapers, under the sector headed ‘Real Estate’.
How risky is a PUT investment?
PUTs are unique as an investment vehicle in that their income stream is substantial and based on long term contracted leases, with the prospects of capital growth. It is the easiest, quickest way to invest in property. PUTs offer high-income returns, which have a low correlation to equities and offer diversification of risk across a number of buildings, sectors, tenants and lease expiry profiles. The South African Revenue Services (SARS)
recently included PUTs as prudential investments for non profit organisations.
What role does the Association of Property Unit Trusts play?
The Association was established in 1984 to look after the interests of PUTs, unit holders and the management companies. Its objectives are to market and promote the sales of participating interests (shares), communicate with regulatory bodies such as the Registrar of Collective Investment Schemes and the JSE Limited and evaluate or lobby for proposed legislation that could affect the industry and unit holders.
Please also visit the Association of Property Unit Trusts’ website through our “Industry Links” page.