investing in REITs

kidmugsy

I'm wondering whether to look into REITs, with a view to ISA or SIPP investing. Does anyone have any experience, any views ....?

bigfreddiel

kidmugsy wrote: »

I'm wondering whether to look into REITs, with a view to ISA or SIPP investing. Does anyone have any experience, any views ....?

depends on your current portfolio - don'tjust hold them for the sake of it.

whats the attraction?

fj

kidmugsy

bigfreddiel wrote: »

whats the attraction?

fj

1) for me: diversification
2) for a member of my family: they will (I assume) generate decent income during our present period of low interest rates, and tho' they will (I assume) fall in capital value when interest rates rise, so will property, so they might be a hedge for someone saving with a view to buying property. An imperfect hedge to be sure, but still more of a hedge than ordinary equity investment, perhaps.

But I know little about them which is why I'm asking here.

bigadaj

Don't you have to be from Yorkshire though?

kidmugsy

bigadaj wrote: »

Don't you have to be from Yorkshire though?

:T:rotfl::j:beer:

bigfreddiel

kidmugsy wrote: »

1) for me: diversification
2) for a member of my family: they will (I assume) generate decent income

1) whats your current mix of equities ?

2 a) never advise a family member - if it doesn't live up to expectations you will be the well out of favour and b) assume nothing

fj

kidmugsy

bigfreddiel wrote: »

assume nothing

Life consists largely of assumptions. No doubt you go to bed assuming you'll get a breakfast in the morning.

grey_gym_sock

kidmugsy wrote: »

No doubt you go to bed assuming you'll get a breakfast in the morning.

perhaps best to have a quick snack before going to bed, just to be on the safe side.

anyway ... since the price of a REIT depends on net asset value and discount/premium, it can end up moving a bit like shares, as well as a bit like property ... so may not give you as much diversification as you'd hope ... but will give some.

moneylover

There is a new one that IC has tipped both at launch (last week) and again when it started to trade
Its ticker no is THRL Target Healthcare Reit

I know nothing else about it - dont hold it, and of course its in a specialist sector . However the manager also runs a fund in same area and that, according to IC, has been successful

Best to hold a REiT in an ISA becuase the interest is taxed as income.

It targets 6% interest.

Ark_Welder

kidmugsy wrote: »

I'm wondering whether to look into REITs, with a view to ISA or SIPP investing. Does anyone have any experience, any views ....?

Some of the companies that are thought of as REITs, in reality, are not: they are investment companies (ICs, like investment trusts) that are incorporated offshore - usually in the Channel Islands. These companies came into being before the advent of REITs in the UK and were incorporated offshore because of the favourable tax treatment that was not available in the UK at the time. The UK REIT legislation came into being to address this issue. As a result, some of the newer investment companies are incorporating in the UK as REITs. Most of the UK REITs were property companies that have converted, such as British Land and Land Securities.

The offshore ICs are largely involved in deriving income from a portfolio of properties, whereas some of the REITs can be more involved with buying and selling them. In the current investment climate, the latter group are more likely to grow their net asset values, whereas the NAVs of those that rely more on deriving income are unlikely to rise until the economy improves.

Over recent years, members of both groups have had to cut their dividend payments. The same rules apply as for other assets: the higher the yield, the more likely it is to be cut, or at least to be unable to grow (much).

Something to check on is the gearing. Not just the level of gearing but how it is structured. Banks have been reluctant to refinance some of these loans - in full, if not just in part - so those companies where the gearing is just through short-term bank loans might have to find other methods of finance when the repayment is due, or sell assets to reduce their gearing and reducing their income stream in the process. (As an aside, there have been a number of closed-end fund launches recently where the purpose is to provide alternative sources of property loans.). Companies that are geared through corporate bonds, ZDPs, or that have relatively small bank loans might be in a better position.

Of the companies that I've seen that have been able to grow their distributions over recent years, they tend to be what were (or still are) property companies (i.e. not investment companies), some of which have converted to REIT status. They tend to be of the smaller-to-medium sized companies that are as happy to trade properties rather than just hold them for the income.

Because all of these are listed on stock exchanges their short-term price movements are likely to be influenced as much by general sentiment towards equities as they are by sentiment towards property. But over longer periods then property prices should come more into play.

As ever, just the opinions and views of one individual.


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