First solely residential Reit welcomed as JSE listing

21 June 2015 - 02:00 By BRENDAN PEACOCK

Investors keen to get greater exposure to the residential property basket will be cheered by the launch on Friday of the first real estate investment trust (Reit) geared entirely towards this asset. Indluplace, headed by long-time listed property player and Arrowhead CEO Gerald Leissner, has a portfolio of 95 properties and more than 3600 rental units valued at R1.6-billion.Indlu is the Zulu word for house.The 12-month forward yield from the date of listing is forecast at 8.2%. For the year ended September 30 2016, it is 8.4%.Residential property remains a tiny component of the South African listed property sector - around 2%, compared with a developed economy average of 13%.But there seems to be a big appetite for it. Indluplace undertook a roadshow before the listing, which was oversubscribed. In all, it raised R400-million through the private placement, which allowed it to settle all the fund's debt before the listing.Leissner said about 20% of the portfolio was in the Johannesburg CBD and surrounds, with 60% in the suburbs around Johannesburg, including Soweto, Rosettenville and Windsor."We also own some properties around Pretoria and we bought a large townhouse complex in Witbank, which makes up about another 20% of the portfolio."Indluplace's target specifications involve mainly apartments and townhouses."Our average rental is R4500 a month, so it's the bottom end of the market and mainly family accommodation," Leissner said.Indluplace would provide traditional property investors with greater diversification, he said."It should attract new investors to the listed property sector. South Africa has strong demand for affordable rental housing and this translates to low vacancies and consistent rental growth. The fund will aggressively acquire additional revenue-enhancing properties to generate growing income returns for shareholders," he said.The Reit is positioned as an exit for developers who want to monetise their properties and move on to other projects."The pipeline for us is enormous. We want to double the portfolio in 12 months and, if we cannot do R5-billion in five years, I would be surprised."We're ungeared, we have access to bank finance and we could go back to the market to raise money to buy," he said.Although some local listed property companies held components of residential property, such as International Housing Solutions, the Wapnicks' Octodec Investments, and SA Corporate Real Estate Fund, Leissner said there were plenty of portfolio owners who would consider selling, and developers who might put up 500 to 1000 units a year...

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