THE National Railways of Zimbabwe (NRZ) Pension Fund plans to list its Real Estate Investment Trust (REIT) on the Zimbabwe Stock Exchange (ZSE) within the first three months of next year to unlock value from its properties.
REITs allow individuals to invest in large-scale income-generating real estate.
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 stock.
The assets may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses and mortgages or loans.
Unlike other real estate companies, a REIT does not develop real estate properties to resell them.
The listing of the NRZ Pension Fund REIT — Revitus REIT — will enable the State railway firm’s pension fund to raise capital for refurbishing its properties across the country’s major cities.
This comes as the real estate sector is witnessing a significant transformation, with businesses migrating from Central Business District (CBD) office space to office parks and suburban offices that are modern, cosy and in line with emerging trends.
Property owners are looking at ways to attract clients by revamping their buildings or repurposing them to meet current market needs.
For instance, in the capital, Harare, some property owners have repurposed their office buildings to cater for budding retail entrepreneurs.
“The NRZ Pension Fund are the promoters of the Revitus REIT, which is a licensed REIT. We are currently working on listing on the Zimbabwe Stock Exchange in the first quarter of 2023,” NRZ Pension Fund board chairperson Mr Takunda Madanha told The Sunday Mail Business.
The NRZ Pension Fund is one of the biggest property owners, mainly of high-rise buildings, in Zimbabwe.
“Most of these properties were
constructed years back and are in need of renovation, revamping and repurposing.
“However, the fund has no financial capacity to support this rejuvenation given that it is now a mature fund saddled with significant cash outflows through payment of member benefits compared to inflows. Listing the REIT will enable the fund to access funding for this purpose,” he said.
The pension fund has initially seeded five buildings, mainly high-rise buildings currently used as office space, into the REIT.
Mr Madanha said over time, the REIT will acquire more buildings not only from the fund, but other investors who meet the criteria for inclusion in the fund.
As regulated investment vehicles, REITs enable the issuer to pool investors’ funds for the purpose of investing in real estate.
In exchange, the investors receive units in the trust and, as beneficiaries of the trust, share profits from the real estate assets.
The ZSE announced the REITs listing framework in 2020, but listings took longer to debut on the bourse as issuers demanded more investor-friendly regulations.
The first listing, Tigere REIT, is expected this week on November 30, 2022.
Market watchers say REITs remained a fair investment option, especially for pension funds, providing an opportunity to raise funds for the rejuvenation of buildings, especially in CBDs, which are dilapidated and have become an eyesore.
Mr Madanha said listing of the Revitus REIT on the bourse will make the fund’s property assets more liquid while also allowing smaller pension funds the opportunity to own real estate as an investment asset class.
REITs provide guaranteed dividends that are distributed from the net rental income.
Current legislation dictates that 80 percent of the net distributable income should be paid out as dividends.
“Members of the pension fund will benefit from this REIT through an uplift in the value of the underlying properties and increased income-generating capacity necessary for payment of member benefits.
“This is also an opportunity to diversify into different property sectors given that most of the high-rise properties are currently used as office space.
“The options available include converting these properties to long-stay apartments and hotel accommodation,” he said.
While the REITs market only allows listing of new buildings, the same legal framework specifically exempts pension funds from that requirement allowing them to list existing buildings constructed prior to January 1, 2021 into the REIT.
“This, however, doesn’t preclude a pension fund from ceding a new building into the fund, and NRZ Pension Fund will consider incorporating new buildings in the future,” added Mr Madanha. – Sunday Mail