Global growth, locally
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With a proven model, exciting pipeline and enticing tax benefits, there's never been a better time to invest in 12Cape.
For the discerning investor, 12Cape offers benefits that are difficult to ignore. As with other Section 12J investments, investors can offset their investments against their taxable income for the year, and invested capital is directed towards sectors in the economy that have been earmarked to boost jobs and economic growth.
12Cape deploys capital in aparthotels in prime areas of Cape Town – a global favourite – operated under the Latitude brand. Latitude Aparthotels, owned by 12Cape investors, is a proudly local brand complete with local themes, furnishing and art.
Aparthotels are becoming a preferred form of accommodation among business tourists and travellers alike. According to Bloomberg: "Thanks to a new, hybrid concept that's taking the hospitality world by storm, it's possible to get the best of both worlds. Meet the boutique apart-hotel. It's half-apartment, half-hotel, but 100 percent ready for your Instagram feed". Numbers from the UK and Ireland – where Aparthotels are increasing four times (as measured by existing stock as a proportion of total prospective pipeline, Lambert Smith Hampton, 2019) – confirm this.
As Covid-19 expedited the rise of the "work from home" trend, Cape Town was named as "One of the Best Cities for Remote Working" by Big 7 Travels. Much is written about the topic and increasing numbers of companies are embracing it. We believe this trend is here to stay which is why our Latitude Aparthotels are geared toward remote working with fast unlimited wifi, co-working spaces and boardrooms. We have experienced increasing numbers of local and foreign guests choosing the Latitude Aparthotel as their base from which to work remotely.
It is therefore no surprise that 12Cape's flagship property – the Latitude Aparthotels in Sea Point, Cape Town – has experienced high occupancy rates (a median monthly occupancy of 86% for the first 12 months of trade) since opening in November 2019, despite the challenges of Covid-19.
12Cape offers other advantages, too. Much of its prospective dividend is attributable to international visitors who generate hard currency income for 12Cape investors. Furthermore, investor capital is invested in a store of value and is secured by the property's underlying value. Investors in 12Cape can expect long-term capital growth associated with prime real estate without the large sums of money usually needed to acquire individual properties. Investors can also expect to participate in yield distribution growth underpinned by global structural trends and currencies, and benefit from a tax deduction while creating jobs and attracting foreign capital to South Africa's shores.
Sunset Clause
Dr. Albertus Marais, Director of AJM Tax, says that while the Section 12J regime provides investors with a substantial tax incentive, it might not be available to investors beyond June 2021. He says "the regime is subject to a sunset clause. This means that the regime will be reviewed before the 30th of June 2021, and might come to an end."
This review will not impact investors who allocate capital to SARS approved venture capital companies in terms of Section 12J of the Income Tax Act before the 28th of February 2021, but might not be available to investors in the same format – or at all – beyond the review period.
Dr. Marais expects more clarity on the future of Section 12J investments during the upcoming budget speech on the 24th of February.