A research report submitted in partial fulfilment for the degree of Master of Science (Building) to the Faculty of Engineering and the Built Environment, School of Construction Economics and Management at the University of the Witwatersrand, Johannesburg, 2017 / Despite the perceived superior performance of the South African listed property market and, even so, the recent introduction of Real Estate Investment Trust legislation to increase its global competitiveness, limited research exists on the market. This report thus examines the drivers of listed property performance from an economic and firm-specific perspective as well as providing an overview of the South African listed property market. The results of the study suggest that investors particularly earn a premium for holding stock with a low ratio of book-to-market value of equity. This study advances the knowledge of the South African listed property market, and further provides investors and fund managers alike with insight on the performance of listed property stock. / XL2018

Thesis submitted in the fulfilment of the requirements for the Degree of the Master of Management in Finance and Investment, 2015/2016 / South African inner-city , through a series of political cycles, social transformations and shifts in local government structures, have undergone significant physical change in a deteriorating direction. This change has largely manifested in the dilapidation of inner-city real estate stock, in that brownfield buildings, or buildings with former residential, commercial and industrial functions, have been re-appropriated for alternative (often illegal) uses that have potential consequences for that redevelopment and, through the sourcing of necessary capital, maybe restored and rehabilitees to better serve inner-city inhabitants and stake holds. / GR2018

A research report submitted to the Faculty of Engineering and the Built Environment in partial fulfilment of the requirements for the degree of Master of Science (Building), University of the Witwatersrand, 2016 / South Africa implemented the REIT structure in 2013 with the intention of encouraging local and international investment. A year after implementation South African listed property was reported to have performed better than the UK, European, and Asian REITs. This report assesses the initial performance of South African REITs and their portfolio diversification benefits when paired with Shares, Bonds, T-Bills, and other Listed Property in a mixed-asset portfolio, over the period May 2013 to December 2015. The findings show that REITs are the second best performing asset, risk-adjusted. REITs are a return-enhancer when included in a mixed-asset portfolio, and tend to contribute at the higher end of the risk spectrum. This reports contributes to the few that exist on emerging markets, it is a study of the only major REIT market in Africa, and is significant as it discusses South African REITs from their implementation. / MT2017

A research report submitted in fulfillment of the requirements for the degree of Master of Building Science in Property Development and Management to the Faculty of Engineering and the Built Environment, University of the Witwatersrand, Johannesburg, 2018 / In April 2013, the South African listed property sector converted from Property Unit Trust and Property Loan Stock investment structures into a Real Estate Investment Trust (REIT) structure that is understood globally. This conversion spurred consolidations in the property market in the form of mergers and acquisitions. Research shows that mergers and acquisitions tend to have high failure rates as growth strategies. It remains unknown how sufficient traditional due diligence is and how it can be improved to enhance the chances of successful corporate marriages within the South African REIT market. This paper reviews the aspects of the traditional due diligence scope which generally comprises of financial, legal and commercial due diligence in order to determine its adequacy as a decision making tool that helps reduce the risk of failure in REIT merger and acquisition transactions in South Africa. There is consensus in the literature that due diligence is a means to reduce the risk of merger and acquisition failure, some studies suggest that failure occurs when due diligence is not done well. This paper uses interviews conducted with due diligence professionals from seven REIT companies listed on the Johannesburg Stock Exchange who were involved in large merger and acquisition transactions in the preceding four years. The interviews were used to ascertain how the professionals perform due diligence, whether or not they think that traditional due diligence is sufficient for REIT mergers and acquisitions and to solicit their views on how the due diligence scope can be expanded. Transcribed data from each of the interviews was analysed based on three concurrent sub-processes adapted from the works of Miles and Huberman (1994) which consist of data reduction, data display and drawing and verifying conclusions. The results show that the traditional due diligence scope is not sufficient for REIT merger and acquisition transactions, a majority of the respondents agree with this observation. Encouragingly the professionals within the South African REIT market have a due diligence scope which is already much wider than the iii traditional scope, be that as it may, there is still a high failure rate of 59% observed in the sample analysed. Due diligence professionals have a low regard for understanding and resolving the different companies cultural issues, this is cited in the literature as one of the contributing factors for merger and acquisition failure. This is an area that can possibly augment the due diligence cycle and professionals should focus on it in order to improve the chances of success. The research proposes expanding the due diligence scope by incorporating strategic due diligence which is forward looking and it overcomes the challenges of traditional due diligence of relying on historic information. Strategic due diligence assists the acquirers understand the target’s future prospects, and it allows the acquirers to determine if the target prospects fit with their own strategic objectives. This together with a higher focus on understanding and resolving cultural issues of the merging companies should augment the traditional scope and ultimately lead to transactions that yield higher shareholder value. / XL2018

Thesis is submitted in partial fulfilment for the degree of M.Sc. Building (Property Development and Marketing) to the Faculty of Engineering and the Built Environment, School of Construction Economics and Management at the University of the Witwatersrand, Johannesburg, 2017 / Background The perception of inconsistent and uncertain valuations has been the subject of debate worldwide. However, it is a phenomenon that has gone largely ignored in South Africa. The effect of unreliable valuations cannot be overstated, as all lending and investment decisions are based on valuation estimates. Objectives This study seeks to investigate the level of valuation accuracy in South Africa by comparing mortgage valuation estimates done prior to finance of the properties against their actual realised transaction prices. Methods and Results Valuers from four financial institutions as well as from external valuation firms were randomly chosen to participate in a questionnaire and in addition 32,826 properties which were valued and sold between January to December 2016 were also analysed. The valuation estimates and actual transaction prices were collected in an Excel file. While data from the banks and valuers was collected and analysed using Qualtrics. Data was analysed using R software version 3.3.3 to come up with descriptive and inference statistics. The result of the analysis showed that the level of valuation accuracy for the properties in South Africa used in the study is high (2.03%), which shows a very high level of accuracy compared to the adopted benchmark of 10%. The accuracy level across the three provinces in our study namely Gauteng, KwaZulu-Natal and Western Cape is 2.23%, 1.93% and 1.58% respectively, indicating that valuation accuracy is higher in Western Cape than Gauteng and KwaZulu-Natal Conclusion The study revealed that valuation estimates were good proxies of the market value (actual realised sale prices). Based on the 10% acceptable margin of error benchmark adopted by this study it shows that valuers in South Africa are indeed accurate in as far as estimating residential cost values. Based on the 2.03% level of accuracy obtained in this study, we recommend that valuation stakeholders adopt 5% maximum margin of error between valuation estimates and actual realised prices. / XL2018

The access to adequate housing is a constitutional right, in terms of Section 26 (1) of the Constitution of the Republic of South Africa, Act 108 of 1996. Access to housing in South Africa is still an ideal and not a reality. The increase in housing prices reduces affordability, which creates a barrier to the housing market for South Africans to fully participate. The South African housing market is divided, based on the affordability of households, with a gap within the property market. The gap-housing market is a market, which does not receive a government subsidy; and furthermore, it does not qualify for bond finance by the private financial institutions. The gap-housing market includes households that earn between R3,500 to R15,000 per month for residential properties valued between R116,703 to R483,481. The problem is a lack of supply in the gap-housing market to meet the demand; and this is also affected by the poor performance of the subsidy-housing market. The gap-housing market is not traded adequately, due to a lack of supply caused by stricter lending criteria from the banks. The study was conducted by means of reviewing the related literature and by an empirical study. A survey was conducted using the quantitative approach through a distribution of research questionnaires to different organizations within the judgement sample population. The objective of the study is to review the gap-housing market and to make recommendations. The descriptive survey was conducted among specialists that are participating in the South African housing market. The findings of the study suggest that there is a relationship between incentive and participation, as well as a relationship between participation – with access, supply and trading in the gap-housing market. This study will contribute to the South African housing market body of knowledge – by addressing the problem of a gap within the housing market.

Thesis is submitted in partial fulfilment for the degree of Master of Science in Building (Property Development and Management), to the Faculty of Engineering and the Built Environment, School of Architecture and Planning at the University of the Witwatersrand, Johannesburg, 2017 / The purpose of this study is to fill specific gaps in the existing body of knowledge of South African corporate real estate management by investigating the determinants influencing the lease versus buy decision; the methods and financing sources of corporate real estate acquisition; and the criteria used in deciding on the financing technique for corporate real estate acquisition. The research followed a similar methodology to that of Redman and Tanner (1991) in their study “The Financing of Corporate Real Estate: A Survey”. However, it specifically focused on the South African corporate real estate environment. The data collection instrument was an online survey and the survey produced quantitative descriptions of certain aspects of the population. The population for the research was corporate real estate decision makers of leading South African companies. The data captured was presented through the aid of tables, charts and graphs. The data was further analysed through cross tabulations and hypothesis testing using the Chi Squared test of independence to determine significance of results. South African firms use some form of leasing (mainly long term leasing) in acquiring their corporate real estate. However, ownership is also a common form of real estate acquisition through the use of mortgages secured by the acquired property, mortgage backed securities and sale of unsecured bonds. The decision criteria for acquisition includes both financial and non-financial determinants. Financial analysis is also an important factor in analysing the lease versus buy decision. This is mainly done by comparing the undiscounted cash flow of leasing versus buying. Where a discounting approach of evaluation is used, the most favoured discount rates include the weighted average cost of capital and rate of return on new investments. Mostly outscored professional services are used when making the lease versus buy decision. The benefit of this study was to understand the factors influencing the corporate real estate decision making process and to provide a corporate real estate decision makers with a decisional framework when determining the form or real estate tenure. Future studies should attempt to secure better response rate to allow for robustness of results and other methodologies of analysis. / XL2018

Research Report submitted for the Master of Science in Building in the field of Property Development and Management at the School of Construction Economics and Management, University of the Witwatersrand, 2016 / On the 4th of July 2013, the South African National Treasury introduced the Taxation Laws Amendment Bill. The purpose of the amendment bill was to introduce new anti-avoidance rules into the Income Tax Act No. 58 of 1962 (the Act) in order to reduce the formation of equity instruments that are falsely masked as debt instruments. The amendment bill contains sections 8F and 8FA which have unintended consequences for the real estate industry, more specifically for the unlisted real estate sector. The application of sections 8F and 8FA of the Taxation Laws Amendment Act, has been suggested to have a negative impact on the returns of unlisted real estate funds. The legislation appears to provide tax relief to real estate investment trusts (REITs) and this is perceived as grossly biased and discriminatory against unlisted real estate funds. The Investment Property Databank (IPD) South Africa estimates the unlisted real estate market in South Africa makes up 46% of the property market. When pension funds and banks, short term and long term insurers, private investors and government are included, the unlisted real estate market is possibly larger than the listed real estate market. Despite the numerous listings of real estate investment trusts South Africa has seen over the last ten years, the listed real estate market is still in its infancy stage and accounts for a very small percentage of the property market in South Africa. This indicates the important role unlisted real estate funds play in the South African property market. The purpose of this study is to find out whether the application of the tax legislation has had any effect on the performance of South African unlisted real estate funds. This study evaluates the investment performance of the unlisted real estate funds and real estate investment trusts (REITS) through the implementation of descriptive statistics, and the event study methodology to indicate whether there is a significant relationship in the returns of unlisted real estate funds and tax legislation. The study finds that tax legislation imposed on South African unlisted real estate funds has had no significant impact on the return performance of unlisted real estate funds. The study also finds that the returns of unlisted real estate funds are very competitive with the listed real estate returns listed on the Johannesburg Stock Exchange. / MT2017

A research report submitted to the Faculty of Engineering and the Built Environment, University of the Witwatersrand, in fulfilment of the requirements for the degree of Master of Science in Building (Property Development and Management), Johannesburg, 2017 / In 2013 new legislation was introduced allowing for the creation of a new listed property entity called a Real Estate Investment Trusts (REIT). Previously the listed property sector was dominated by two main types of property which were Property Unit Trusts (PUT) and Property Loan Stock Companies (PLS). The introduction of the REIT entity allowed existing listed property companies to convert to REIT status and for new companies to list on the Johannesburg Stock Exchange as REITs. The purpose of this study is to evaluate the impact of REIT implementation and the conversion of PLS and PUT to REIT status on shareholder wealth in South Africa. The study evaluates the change in shareholder wealth through the use of abnormal return calculations during events that led up to the implementation of REITs and conversion to REIT status. The findings show that implementation and conversion to REITs did not result in significant industry gains in shareholder wealth. The events leading to the implementation of REITs however showed positive abnormal returns out lining positive sentiments in the market. For the companies that converted to REIT status their shareholder wealth had negative performance returns. Immediate gains in shareholder wealth are not present. This indicating that the use of REITs as an investment will have to be monitored in the long term. / XL2018

A great deal of research has been carried out on residential property values and numerous factors have been identified as having an effect on residential property values. The physical characteristics of properties of properties are the primary factors that determine the market value of residential property. However, factors concerning location are also thought to influence the value of residential properties. These locational factors include, among others, accessibility to highways, airports, schools, parks and public transportation centres. This study examines the effect of another locational factor, namely proximity to a newly built shopping centre. Shopping centres have been increasing in numbers throughout South Africa over the past few decades. These shopping centres are usually situated in close proximity to residential properties. As such, shopping centres that are in close proximity to residential properties can influence property prices. This study makes use of the hedonic price model to assess the price impact of the newly constructed Baywest Mall on the residential properties in the western suburbs of Nelson Mandela, namely Sherwood, Rowallan Park and Kunune Park. On 21 March 2012, the construction of the Baywest Mall was officially announced. This announcement created an area of interest as to whether its construction and completion would have an impact on the prices of residential properties situated in close proximity to the mall. The study period for this study was from 2004 – 2015. This time period is thought to be sufficient to assess the effect of the Baywest Shopping Mall on the residential property prices before and after the announcement of the construction of the mall. As the study period ranged from 2004 – 2015 it was necessary to adjust the sales prices over the years to constant 2015 prices. As such, the ABSA house price index was used in order to eliminate any inflationary effects on the property values over the study period. The results of the study revealed that the newly built Baywest Mall has a statistically significant positive effect on properties in close proximity to the shopping mall. This result enhances the scientific understanding of the effect of commercial land uses, such as, shopping centres, on the value of adjacent residential properties.