One of the biggest pieces of news this year in the investment and finance world was the listing of the Tigere REIT on the Zimbabwe stock exchange. The feeling I got from the whole episode was that a lot of finance nerds like me were giddy and excited while the rest of the country wondered what the fuss was all about. In this article, we will try to explain what the Tigere REIT is and why it is listing on the Zimbabwe Stock Exchange (ZSE). This is an exciting development in Zimbabwe’s real Estate sector and the country’s economy as a whole.
Who are Tigere and what the heck is a REIT?
These were the two burning questions that most of my friends who are not in Finance had as they wondered why most websites and blogs in Zimbabwe were chattering about Tigere. Well, Tigere is a Real Estate Investment Trust (REIT) owned by the Asset Management firm known as Terrace Africa. A real estate trust is a special form of “company” that owns and or finances income-generating real estate properties. They allow ordinary individuals like you and me to invest in the real estate sector.
Think about it this way - Real Estate is a very lucrative market where there is an opportunity for lots of money to be made. The problem is that large amounts of capital are required in order for you to participate in the sector. For example, the most lucrative real estate sector is in commercial buildings which come at a higher price tag. You would need millions of dollars before you could even begin to think about buying or building a commercial real estate project. That amount does not include the vast amount of working capital you would need for things like carrying out repairs, servicing lifts, paying staff, paying insurance premiums and generally making sure the building is up to code.
Enter a real estate investment trust. A trust is generally like a cooperative. It allows you to be able to join hands with other like-minded investors and partake in the real estate market. You can take your “paltry” US$1,000, and put it into the trust, the trust then pools these funds and invests them in mega-real estate projects in return for profit. At the end of each year, the trust may pay out a dividend as your share of the profit in the investment. As property prices increase so will the value of the units that you have bought in the REIT. Just like that you are able to participate in a sector that would normally be closed to you.
That sounds familiar so why is Tigere special?
If the whole idea of forming a cooperative to do business sounds very familiar it is because it is. We grew up with our mothers and fathers forming cooperatives to enter into all sorts of ventures. In rural Honde Valley where I grew up, cooperatives are a dime and a dozen. There are borehole cooperatives, irrigation canal cooperatives, cooperatives that own and run shops and market gardening cooperatives that grow all those famous sweet bananas for which Honde Valley is known for.
Even in Harare and in real estate, cooperatives are nothing new. We have all sorts of housing cooperatives that are constantly peddling their stands and dubious offerings across social media. Some are legitimate ones that allow ordinary folk to buy and develop properties. Some are pure money grabs crafted by land barons hellbent on separating you and your money. Tigere is special in that it is legitimate, legal and wholly licensed. Not only that but it is also publicly listed on the Zimbabwe Stock Exchange which means that it is legally allowed to actually sell its units to you.
Let’s unpack that
While companies have shares, REITs have units. Think of a unit as being the smallest part of the REIT you can own just as a share is the smallest division of a company you can own. At the time when they planned to go to market, Tigere had about 719 323 000 units available for sale and there is every chance each one of these will be sold at a later date. The units were going to be sold at a planned $28 ZWL per unit. They intend to sell a total of 255 323 000 REIT units. As already said when you buy each unit you will receive a share of Tigere’s profits based on how many units you own.
Unlike a lot of housing cooperatives, you can always change your mind and sell these units publicly to whoever you choose provided you follow the proper disposal procedures which are not all that onerous. This is also a legal venture which means you have more protection than you would get if you were to invest in a fly-by-night cooperative or trust. You can rest assured that some smart people and the authorities have scrutinised each nook and cranny of Tigere and they would not have made it this far if there was something wrong with them.
Still not convinced? Tigere is not some paper tiger. They already own two lucrative properties: Highland Park and Chinamano corner (located at corner J. Chinamano and Sam Mujoma (what everyone calls Second Street). So if you buy one of their units you can go around boasting about being part owner of one of these.