THE country’s only real estate investment trust (REIT), Tigere, has distributed over 80% of its income as dividends since listing on the Zimbabwe Stock Exchange (ZSE) in 2022, according to the Securities and Exchange Commission of Zimbabwe (SecZim).
SecZim said in its first quarter report that in contrast, other listed property firms, First Mutual Properties and Mashonaland Holdings, distributed less than 3%.
Tigere Property Fund was the first publicly traded REIT on the domestic market after listing on the ZSE at the end of last year.
However, many REITs have been registered with SecZim, but are yet to go public.
Fidelity Life Asset Management’s Eagle REIT is set to list on the Victoria Falls Stock Exchange in 2024.
The SecZim report quoted Fidelity Life Asset Management investment analyst Duncan Momberume as saying Tigere’s REIT was performing well compared to other listed property equities on ZSE.
“The REITs has managed to distribute over 80% of its income as dividends as stipulated by law since its listing in November 2022, while First Mutual Properties and Mashonaland Holdings managed to distribute only less than 3% of their income,” Momberume was quoted as saying.
“In terms of share price performance, the listed property equities, namely First Mutual Properties and Mashonaland Holding, performed better than REIT.
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“However, equities have shown stronger correlation with depreciating exchange rates above 80% than REITs of below 70%, which justifies that the rally behind the share prices is not reflective of the companies’ assets performance or true fundamental value of the stocks.
“Furthermore, the REIT is still new to the market as compared to the property companies listed,” he said.
Momberume was quoted as saying he looked at the property expense ratios, collection rates and occupancy levels as well as the United States dollar (USD) percentage of total rentals, to have a general overview of the performance of real estate assets.
“The REIT is enjoying a low property expense ratio of 19% as compared to the property companies with above 45%. On the other hand, the REIT is also performing better with 100% occupancy levels and 80% of rentals are in USD whilst the market is averaging 86% occupancy levels,” he said.
The total value-traded on the REIT board was ZW$$406 million (US$437 029) and the total number of REIT units that exchanged hands in the first quarter of 2023 was eight million.
The market capitalisation for the REITs was ZW$36 billion (US$38,8 million) at the end of the quarter under review.
Zimbabwe is one of the recent countries to adopt REITs as part of its economic development strategies.
A REIT is a company that owns, operates, or finances income-producing real estate.
REITs help house national economies by providing much of the real estate where people live, work, shop, and spend their leisure time, from houses and apartments in which they reside to shopping centres and offices where they work.
REITs enable today’s digital economy and communication with real estate, such as data centres, and logistics facilities. They are generally subject to a single level of taxation at the shareholder level, effected by either allowing the entity a deduction attributable to distributed dividends or exempting such income from taxation at the entity level.
Historically, REITs have delivered competitive total returns based on high, steady dividend income and long-term capital appreciation.
Their comparatively low correlation with other assets also makes them an excellent portfolio diversifier that can help reduce overall portfolio risk and increase returns.
REITs have been incorporated into national economic development plans all around the world.
Since the introduction of REITs in the United States in 1960, 42 countries and regions, totalling approximately five billion people and accounting for 83% of global gross domestic product, have permitted them.
There are now 894 listed REITs operating globally, reports show.
The equity market capitalisation of listed REITs has increased from around US$10 billion in 1990 to US$1,9 trillion at the end of 2022, according to several reports.
According to Technavio, a leading market research company with global coverage, the REIT market is expected to grow at a compound annual growth rate of 2,8% between 2022 and 2027.
The size of the market is forecast to increase by US$333 billion during the period.
The firm said growth will depend on several factors, including an increase in global demand for warehousing and storage facilities, a growing residential sector globally, and increasing support from governments.
It said the increase in global demand for warehousing and storage facilities is notably driving market growth, although factors, such as vertical integration by e-commerce companies may impede this expansion.
