27 January 2017 Tax & Exchange Control

Our team successfully pulled off the first real estate investment trust (REIT) conversion of its kind

Our firm's full-service offering allowed experts from our Real Estate, Corporate and Commercial and Tax and Exchange Control practices to work together to successfully pull off the first real estate investment trust (REIT) conversion of its kind.

This achievement was no small feat considering there was no regulatory framework in place and the fact that our team of experts were extensively involved in procuring amendments to both the Income Tax Act, as amended, and the regulatory issues surrounding collective investment schemes in property (CISPs), to enable the conversions to take place.

CDH advised in the conversions of CISPs to REITS on behalf of firm clients, Capital Property Fund (the CISP) to Capital Property Fund Limited (the Corporate REIT) (completed in 2014); SA Corporate Real Estate Fund to SA Corporate Real Estate Limited (2014/5); and a REIT conversion and scheme of arrangement in terms of which Sycom is to be delisted as a CISP and its assets transferred to Growthpoint Properties Limited. Both the SAC conversion and the Sycom scheme were complex matters involving the CISP transferring all of its assets and liabilities to a new company, which in the case of SAC was listed on the JSE as a corporate REIT and in the case of Sycom was acquired by Growthpoint Properties Limited. Both transactions involved obtaining complex tax rulings from SARS and these ground breaking rulings had to be taken into account in the implementation of the transactions.

The CISP conversions included a range of unique issues relating to amending both the tax and FSB legislation to permit the CISPs which are listed trusts to convert to corporate REITs, without tax "leakage". Our clients benefited from CDH's ability to field a large team of lawyers and corporate advisers to address the real estate, tax, commercial, JSE, FSB and competition law issues. Taking lead advisory roles in the conversions were Partners, William Midgley (Corporate and Commercial); Dr Emil Brincker (National Practice Head of Tax and Exchange Control); and Attie Pretorius (National Practice Head of Real Estate). Associates, Kelsey Biddulph (Corporate and Commercial) and Samantha Kelly (Real Estate) also attributed to the success of each conversion. Very few, if any, of our competitors have the depth of market knowledge and technical skills to handling mandates at this level.