Exclusive: Zambia's first REIT lists on local exchange
The US dollar quoted REIT is expected to change the fortunes of Real Estate Investments Zambia Ltd.
Real Estate Investments Zambia Plc (LuSE: REIZ), a listed Zambian company, has launched the country’s first ever Real Estate Investment Trust (REIT). The REIT will be traded in US dollars and is expected to change the fortunes of the business, which has been plagued by different problems in recent years.
In an interview with Capital Markets Africa, CEO Kambeu Banda described the news as “historic.” He said that REIZ Plc’s first achievement had been to “[give] the Zambian citizens an opportunity to own shares in a portfolio of prime properties in the country.”
REIZ Plc’s prime commercial properties include Acacia Park, Jacaranda Mall, and Lewanika Mall. “[The company] has a lot of potential for growth and [has] the ability to compete with other REITs in southern Africa and beyond,” Banda said. “[Having a US dollar traded instrument] will make it easier for foreign investors to understand the market and trade on the stock exchange.”
For the half-year to September 2023, overall revenue was up 18%. And although a loss after tax was recorded for the same period, it was 70% better than the year before.
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First created in 1960 in the United States, REITs are companies that own, operate, or finance income-producing properties. Typically, they are listed on a stock exchange where investors can invest into a pooled fund, as with mutual funds.
Investors typically find REITs attractive because they provide a steady income stream without the burden of having to buy or manage a physical property asset themselves. Companies, on the other hand, receive the capital they need to operate and invest.
There is also a tax incentive. Corporation tax isn’t levied when 75% of the earnings (the rate in Zambia), after post-operational expenses, are distributed to unitholders.
Banda explained that REIZ Plc needed to rapidly grow its portfolio to attract investors that look at portfolio size as a prerequisite for investing.
“We’re looking at acquiring more prime income earning properties with good yields as we want to provide our investors with a certain targeted yield,” he said. “Our hope is that as we approach other property owners for these transactions, they will be willing to agree to share swap structured transactions,” he said.
Over the medium term, REIZ Plc plans to complete a secondary listing on either a regional or non-African exchange. The goal would be “to tap into a more liquid stock market for the benefit of shareholders that seek an easy exit.”
As for the broader African market, REITs already exist in countries such as South Africa, Ghana, Nigeria, and Kenya.
REIZ Plc is majority owned by Diego Cassilli, a Zambian businessman, via Mauritius-registered LM&C Properties Limited.
Musa Dudhia & Co. acted as legal adviser on the transaction while Pangaea Securities acted as sponsoring broker.
© Capital Markets Africa, 2024
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Well done CEO Banda