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Johannesburg - The SA REIT (Real Estate Investment Trust) sector has published Best Practice Recommendations (BPR) that will make financial reporting of South African REITs clearer and more comparable.
The SA REIT Association worked with National Treasury, the SA Revenue Service (Sars), the JSE and others in this regard. Introduced in 2013, SA REIT legislation placed the listed property sector on par with similar investments around the globe. This ensured that the vehicle for the monetising and listing of property assets in South Africa is consistent with REIT structures internationally, making the sector more attractive for international investors.
Laurence Rapp, chair of the SA REIT Association, says the best practice recommendations for SA REITs will enhance the financial reporting of the sector, resulting in greater transparency, consistency and comparability. This plays an important role in attracting global flows of capital into the South African listed property sector.
Laurence Cohen, chair of the SA REIT Accounting and JSE Committee, says, the adoption of REIT legislation has been positive for the SA listed property sector.
"Publishing the first edition of the SA REIT BPR continues our commitment to providing a listed property structure that is uniform and well understood, both locally and internationally. It will assist in providing the market with clear, comparable and relevant financial reporting by SA REITs,” said Cohen.
Cohen explains that, while SA REITs are companies, they have particular nuances and ways of reporting that are unique to the sector. For example, while most companies measure performance by growth in headline earnings, the performance of a REIT is largely measured by growth in distribution per share.
Due to the impact of reporting in terms of IFRS (International Financial Reporting Standards), headline earnings are frequently quite different from distributable earnings.
With this year representing first time compliance with the BPR, Cohen notes that some SA REITs may have to change the way they report in some areas. Notable changes to look out for are the reporting of cost-to-income ratios and the determination of revenue.
