A Property Unit Trust, or PUT, is a portfolio of investment grade properties listed on the JSE and is value generated, in the short term, through rental income of the properties in the portfolio and, in the long term, through the appreciation in the values of these properties over time.

The recent implementation by the JSE of the FTSE-JSE Africa Index series has resulted in a "Real Estate" sector - which includes PUTs, property loan stock companies as well as property holding and developement companies and the JSE runs a sub-index specifically for PUTs. With the recent promulgation of the new Collective Investment Schemes Act, PUTs are technically collective investment schemes in property, but are still referred to as PUTs as the nature of the investment remains the same.

The unit trusts are highly regulated vehicles in that they are governed by the Collective Investment Schemes Act under the auspices of the Registrar of Unit Trusts – a Financial Services Board (FSB) function. The affairs of the management companies who administer the PUTs are regulated by a Trust Deed between the management company and a trustee. In addition, PUTs are subject to all the regulatory requirements imposed by the JSE for securities exchange listing.

Today, the sector comprises six listed trusts, with a total market capitalisation of approximately R6-billion.

The association advises investors to balance their investment exposure across a spread of equity, property and cash investments. While equity provides for capital growth and cash reduces risk, property offers investors the best of both worlds. It’s a secure, stable investment with a predictable future income stream, as well as the prospects of capital growth. The easiest, quickest, and safest way of investing in property is undoubtedly through PUTs, which are considered to have one of the lowest risk profiles of property investment vehicles, and have the following benefits:

They provide an accessible vehicle for investment in prime, well located property, available in low-denomination units.

• They are easily bought and sold on the JSE, making the investment simpler to trade than physical property;
• The daily prices of the various PUTs are available in most newspapers;
• Investment in a PUT does not require specialised property management expertise;
• Unit holders’ interests are protected by strict regulatory controls;
• PUTs offer high income returns, which are generally less volatile than equities, thus smoothing returns from a mixed portfolio;
• Borrowing are currently limited to 30 percent of the fund’s assets, so there is little risk that income will be eroded by high interest payments;
• They offer investor diversification of property risk over a number of buildings, tenants, lease expiry profiles and property sectors;
• Investors can purchase exposure to specific property sectors or geographical areas by investing in one of the more focused PUTs;
• They represent excellent security for investors who wish to raise loans; and
• Investors receive pre-tax income from their investment.

The following factors should be considered when investing in a PUT:

• Sector profile: office (commercial), retail, industrial (including warehouses), or a mix.
• Geographic profile: the spread of leases over the portfolio, and
• Management Company: responsible for the day-to-day management of the fund and properties.

An order to purchase units in a PUT must be placed with a stockbroker, who will charge a brokerage fee, which can be as low as 0.35% of the value of the transaction. Unlike many other investment products, PUTs are not sold directly to investors by financial intermediaries, and thus there is no additional sales commission payable on the purchase of units.

Having decided that such a PUT investment fits your individual needs, you are advised to consult a stockbroker directly, or another financial adviser such as your accountant, bank manager or attorney, who should be able to assist you in placing an order with a stockbroker.

For more information see www.put.co.za