What is a REIT fund, and why should we get to know it better? • Yair Levy, an expert in commercial real estate, and with him Ofer Avram from the ‘Manivim’ REIT fund, for the advice that will pay off for you • Chapter 08
Once in a while, the phrase REIT fund becomes popular in the landscape of the housing and real estate industry. what’s the matter? In the eighth episode of ‘The Capitalist’ presented by Yair Levy, an expert in business real estate, about all the secrets of the real estate world, he talked with Ofer Avram from the Reit Manivim Fund, and together they understood what this fund is and how it can benefit us, both as investors and consumers.
“In the last line it is a real estate investment fund, a profitable real estate company that was regulated within the framework of a regulation that the legislator made seventeen years ago for the first time in Israel, when the story is that the REIT fund is a profitable real estate company that does not pay taxes,” he described Abram. “In order to receive this benefit of not receiving tax, she has to comply with a set of rules, a regulation, regulated in the tax ordinance. It does not pay taxes on its income, and in order not to pay tax it has to comply with a set of rules established by the legislator, and all that is required is a solid platform with minimal risk. The Heritage Fund is supposed to be a means of investing in real estate that yields income for a person from the settlement. You need to know how to manage assets of this type, managing commercial, logistical, and office assets requires a different level of professionalism than renting an apartment.” The platform called REIT, which is actually a public real estate company, a significant part of this matter is that this company should be public, that is, traded on the stock exchange, so that the person from the settlement can buy the company’s shares on the stock exchange. The fund you invest in owns the assets. The income from rent minus the expenses that the fund has are the profits, which the fund is obliged to distribute as a dividend. The additional advantages are that some funds have specific specializations. In the field of yielding assets, there are a total of three funds in Israel.”
And if we are dealing with real estate
And what about the real estate sector specifically? “There are several funds that deal in the residential sector,” replied Ofer. “These funds manage the apartments regularly and similar to what we do, they are supposed to distribute their income as a dividend, their model is a bit more complex than ours. So here there is a separation in the law between types of funds, funds in the commercial field, industry, logistics, offices and so on. In the residential area there are concessions to encourage the branch, so the state established a reduced tax of half a percent. The state is not harmed by this story, because in the end it sees its tax in a situation of sale. There is also a matter of periods, sometimes it is very complex to sell a property and certainly to find the right timing. In stocks it’s simpler.”
At the end of his words, he clarified: “We are in a complex period. The most significant thing that affects real estate is, of course, the entire interest rate environment. Interest rates have risen drastically in the world and in Israel, and this has a huge impact. When you own a share of a REIT fund, it contains a professional entity that manages the property for you.”
