Proceedings of the 45th International Academic Conference, London

DEBT CAPITAL MARKETS AS A FUNDING SOURCE FOR LISTED PROPERTY FUNDS IN SOUTH AFRICA

COLIN MURPHY, CHRIS CLOETE

Abstract:

Purpose of paper Property finance in South Africa has traditionally been a market dominated by bank lend-ing. However in the context of the Basel III Accord creating cost and other regulatory impli-cations for bank lending, as well a maturing listed property market adopting international best practice in the form of REIT legislation, debt capital markets funding is becoming a significant component of REITs’ capital structure. The study seeks to determine the merits and impact of this nascent funding source for REITs in South Africa. Methodology Following a review of applicable literature, interviews with senior management of nine listed property funds and other debt capital markets stakeholders were undertaken. Cer-tain advantages and disadvantages of debt capital markets funding, in comparison to other lending sources, were presented as hypotheses to the interviewees. Findings The responses show support from a significant majority of the interviewees for four partic-ular advantages and two disadvantages. The study also found support for these ad-vantages and disadvantages to be transient. Value of paper It is advised that REITs periodically reassess the respective advantages and disadvantages of this funding source for their business.

Keywords: REIT; Basel III; debt capital funding

DOI: 10.20472/IAC.2019.045.026

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