Zimbabwe’s capital markets, the ZSE in particular, have been topical for the wrong reasons over the last 6 months. Finally, some good news is coming out of that corner. Just as we were ready to go another year down waiting for the first Real Estate Investment Trust, the Tigere Real Estate Investment Trust finally became public knowledge. Of course, the devil is in the details so let’s put together a few facts about that development.
Real Estate Investment Trusts
Perhaps the best way to explain REITs is to contrast them to real estate, which many already understand. In order to invest in real estate, one requires either enough money to purchase a property or access to mortgage finance. This may be difficult. In addition to this, assuming the property is for rental, one must either pay an agent to manage the property or deal with tenants, maintenance and other issues directly. REITs can essentially offer all the benefits of owning and operating an investment property without the huge buy-in or operational complexity. They break down the ownership of property into many small units while paying out a stipulated percentage of income (up to 80%) to unit holders. Making light work by using collective investment.
Read the full article: Real Estate Investment Trusts Explained
REITs were announced together with Exchange Traded Funds as new products coming to Zimbabwe Capital markets in 2020. While ETFs have grown to 5 active listings with around 3 more in the pipeline, REITs have languished in coming soon status in the same period. To finally have one ready to list is something to celebrate.
Tigere Property Fund
The Tigere property fund is synonymous with the Terrace Africa Group. You may have heard of this group in connection with the planned expansion of the TM PicknPay store network in Zimbabwe. Terrace Africa is behind the construction of new shopping centres that TM PicknPay Stores will anchor. The Terrace Africa group is on a path to establish 5 developments across the country, with more in the pipeline. These are namely the existing Borrowdale Village Walk, Highland Park phases 1 and 2, Chinamano corner and Marondera main. Terrace Africa also has projects in Mozambique, Zambia and South Africa. The Tigere property fund
The Tigere REIT announcement came in the form of a pre-listing prospectus. The prospectus waxed lyrical about the outlook of the REIT, as a prospectus should. The most important detail was the confirmation of the REIT income payout strategy, which binds it to pay out 80% of its profits to REIT holders. The frequency of these distributions has been left up to the management so they can pay monthly, but this is highly unlikely. At best, you’re looking at a semi-annual payment, as we see with blue chip counters on the ZSE when it comes to dividends. The REIT Initial Public Offering of 255 323 000 units will list with an opening price of ZWL$28 per unit. Eventually, the fund plans to list 719 323 000 units. That initially seems a little steep compared to similar products’ initial listing prices. Still, you are advised to seek advice from a financial services provider to ensure that the product pricing is appropriate.
The REIT is set to list on November 23rd, with offers being open until the 18th of November. This brings some relief to investors who had been losing heart about the listing of REITs. We welcome the first REIT with caution and will look forward to adding it to our regular coverage and hopefully reporting on establishing more REITs in the near future.