Wrap Text
Implementation of the U Reit transaction and granting of REIT status
Collins Property Group Limited
(previously Tradehold Limited)
(Registration number: 1970/009054/06)
Incorporated in the Republic of South Africa
JSE Share code: CPP ISIN: ZAE000152658
(Approved as a REIT by the JSE)
("Collins" or "the Company")
IMPLEMENTATION OF THE U REIT TRANSACTION AND GRANTING OF REIT STATUS
1. IMPLEMENTATION OF THE U REIT TRANSACTION
Shareholders are referred to the announcement released on SENS on 21 August 2023 (the "U Reit
Terms Announcement") wherein shareholders were advised that the Company had entered into a
series of inter-conditional agreements with U Reit Collins Proprietary Limited ("U Reit"), a wholly-owned
subsidiary of Castleview Property Fund Limited, in terms of which, if implemented, Collins would acquire
the 25.7% of the issued shares of Collins Property Projects Proprietary Limited ("CPP") that it does not
own in exchange for the issue to U Reit of in aggregate 72 751 197 new Collins ordinary shares (the
"U Reit Transaction"), resulting in CPP becoming a wholly-owned subsidiary of Collins and U Reit
holding 21.78% of the issued ordinary shares of Collins.
The Company is pleased to inform shareholders that all conditions precedent to the U Reit Transaction
have been fulfilled and CPP is now a wholly-owned subsidiary of Collins, with U Reit holding 21.78%
of the issued ordinary shares of Collins.
2. GRANTING OF REIT STATUS
In the U Reit Terms Announcement, Collins shareholders were advised of the Company's intention to
apply for status as a Real Estate Investment Trust ("REIT") with the JSE.
Collins is pleased to inform shareholders that Collins has been granted REIT status by the JSE with
effect from Thursday, 21 December 2023. Following Collins being granted REIT status, Collins intends
to apply for its listed shares to trade in the Industrial REITs sector of the JSE.
3. TAX CONSIDERATION TO COLLINS BEING GRANTED REIT STATUS
In order to qualify as a REIT for tax purposes, an entity must be a South African tax resident and its
securities must be listed on the JSE as securities in a REIT.
A REIT is entitled to claim a deduction in respect of all qualifying distributions made by it. The deduction
does not apply to any dividends in the form of share buybacks. In order to become a qualifying
distribution at least 75% of the gross income received by or accrued to a REIT must consist of rental
income. The concept of rental income is not only defined with reference to amounts received or accrued
in respect of the use of immovable property such as rental, but also includes, amongst others:
- a penalty or interest in respect of the late payment of rentals;
- a dividend from a company that is a REIT at the time of the distribution of the dividend;
- a qualifying distribution from a company that is a controlled company at the time of that
distribution; or a dividend or a foreign dividend from a company that is a property company at
the time of that distribution.
By being able to claim a deduction in respect of these qualifying distributions, the tax liability of a REIT
is expected to be minimal. The consequence of being able to claim a deduction in respect of qualifying
distributions is that the dividends distributed by a REIT to resident shareholders will be subject to normal
tax and will not be exempt. However, no additional dividends tax will be payable in respect of these
distributions which are subject to income tax. With effect from 1 January 2014, dividends that are
distributed by a REIT to foreign shareholders are subject to dividends withholdings tax.
The tax dispensation that applies to REITs also applies to so-called controlled companies. A controlled
company is a company that is a subsidiary of a REIT as defined in terms of IFRS. A controlled company
can make deductible distributions to the REIT for so long as the 75% rental test is satisfied.
A second category of companies that is relevant for a REIT is that of a property company. This is a
company in which 20% or more of the equity shares or linked units are held by a REIT or a controlled
company and of which at the end of the previous year of assessment 80% or more of the value of the
assets, as reflected in the annual financial statements of such property company for the previous year
of assessment is, directly or indirectly, attributable to immovable property. Even though this type of
entity is not entitled to deduct distributions, the distributions so received by a REIT from a property
company will qualify as rental income. Pursuant to being classified as a REIT for tax purposes, capital
gains or losses that arise in respect of the disposal by a REIT or a controlled company of the following
assets are to be ignored for capital gains tax purposes:
- immovable property;
- a share or a linked unit in a company that is a REIT at the time of the disposal; or
- a share or a linked unit in a company that is a property company at the time of the disposal.
Proceeds from assets disposed of as part of a scheme of profit making or which were held as trading
stock must still be included in the gross income of the REIT and, subject to available deductions,
including the deduction of qualifying distributions, may be subject to tax in the hands of the REIT.
A REIT or controlled company cannot claim allowances in respect of immovable property in terms of
sections 11(g), 13, 13bis, 13quat, 13quin or 13sex of the Income Tax Act. The aggregate amount of
the deductions that can be claimed by a REIT in respect of a qualifying distribution may not exceed the
taxable income for that year of assessment of that REIT or the relevant controlled company, before
taking into account:
- any deduction of an amount as envisaged in section 25BB of the Income Tax Act;
- any assessed loss brought forward in terms of section 20 of the Income Tax Act; and
- the amount of taxable capital gain included in taxable income in terms of section 26A of the
Income Tax Act.
Both the acquisition and disposal of shares in a REIT are exempt from the payment of securities transfer
tax.
Cape Town
21 December 2023
Sponsor
Questco Corporate Advisory Proprietary Limited
Date: 21-12-2023 08:00:00
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