Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Want Exposure To Real Estate Properties Without Added Effort? Consider REITs

By Investing.com (Tezcan Gecgil/Investing.com )Stock MarketsNov 11, 2020 07:51
uk.investing.com/analysis/want-exposure-to-real-estate-properties-without-added-effort-consider-reits-200449602
Want Exposure To Real Estate Properties Without Added Effort? Consider REITs
By Investing.com (Tezcan Gecgil/Investing.com )   |  Nov 11, 2020 07:51
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

For most people, home is where the heart is, making real estate one of the top asset classes for many investors.

Strong property price accelerations over time frequently make headlines on both sides of 'the pond,' whether in the US or UK, as well as in many other countries. Thus, investing in buy-to-let, or rental property has also become quite popular over the past few decades.

However, being a landlord or a landlady may not appeal to some. It can be difficult and time-consuming. Obtaining a mortgage, managing the properties, collecting rent, collaborating with estate agents, finding tenants, and property upkeep can easily turn into a full-time job.

Although investing in traditional brick-and-mortar assets may sound complicated, many financial planners see genuine merit in having exposure to property as part of a diversified investment portfolio.

What can those investors who may not have the capital or the time to build or maintain a real estate portfolio do? They could easily buy publicly-listed Real Estate Investment Trusts (REITs).

Previously we discussed REIT investing in the US and looked at several exchange-traded funds (ETFs), including the Vanguard Real Estate Index Fund ETF Shares (NYSE:VNQ), the Real Estate Select Sector SPDR Fund (NYSE:XLRE) and the iShares Residential and Multisector Real Estate ETF (NYSE:REZ).

REITs may offer exposure to residential, retail, office or industrial properties as well as more specialized property such as cell towers or data centers. Today we'll focus on British Land (LON:BLND), (OTC:BTLCY), a REIT that is part of the UK's FTSE 100 index.

UK-Based REITs Operate In A Significant Sector

The REIT regime was introduced in the UK in 2007, whereby real estate investment trusts own and manage properties on behalf of shareholders. By law, UK-based REITs must pay out 90% of their taxable profits to shareholders.

The London Stock Exchange highlights the segment by saying, "there are over 50 REITs with a market capitalisation of over $70bn listed" on the exchange.

The UK property market is one of the most significant sectors of the economy. Over 1.2 million people work in the industry, which contributes about 7% to the country's economy annually – about £100 billion (or $132.5 billion).

According to the leading property portal Rightmove (OTC:RTMVY), the UK saw a:

“[N]ew national record for average price of property coming to market, with a 1.1% (+£3,534) monthly rise. Prices now 5.5% (+£16,818) higher than a year ago, the biggest rate of increase for over four years, with Rightmove now forecasting annual growth rate to peak at circa 7% by December."


British Land

The group has close to £15 billion (about $20 billion) assets under management. The occupancy rate and annualized rent stand at 96.6% and £516 million ($683 million), respectively.

BLND Weekly TTM
BLND Weekly TTM

Its commercial space in London, mainly around Broadgate, Regent's Place and Paddington Central, comprises over 60% of the total portfolio. Retail makes up close to 35% of the portfolio, but management is planning "to reduce this business to 25-30% of the total over the medium term."

It is currently developing a new urban center over 53 acres in Canada Water, across from Canary Wharf, one of the most important financial districts in Europe and worldwide.

During 2020 the group endured a serious dent in its growth and operations. In late May, British Land announced full-year results for the year ended 31 March. It reported losses on lower rental income. Pre-tax loss was £1.1billion ($1.32) and net rental income fell 10.1%.

Even before the coronavirus pandemic reached the UK in late February, like many other REITs, British Land had been troubled by fears over Brexit, the UK's departure from the European Union. Due to its exposure to commercial property, the long-predicted death of bricks-and-mortar retail outlets hadn't helped the shares, either.

Since the start of the year, BLND shares are down over 27%. On Nov. 10, it closed at 464.90p ($6.19 for US-based shares). In early October, it reinstated the 5.1% yielding dividend that had been suspended earlier in the year. The group's price-to-book (P/B) ratio of 0.61 could appeal to value investors, with a number under 1.0 indicating a potentially undervalued stock.

On Nov. 18, the group will release half-year results. Potential investors may want to analyze the metrics before committing capital into the REIT. On a final note, British Land aims to deliver "a net zero carbon portfolio by 2030."

Bottom Line

Property is a tangible asset that most of us are familiar with. Many investors in the US, the UK and other countries invest in property by including REITs in their portfolios. They are liquid assets, easily traded on stock exchanges. They typically offer higher returns than bank savings accounts, and also have the potential to deliver capital growth.

Those investors who would like exposure to US-based REITs may also research Atlanta, Georgia-headquartered Americold Realty Trust (NYSE:COLD), which specializes in temperature-controlled warehouses, Chicago, Illinois-based Brookfield Property REIT (NASDAQ:BPYU), which focuses on commercial properties, Houston, Texas-headquartered cell tower REIT Crown Castle International (NYSE:CCI), San Francisco, California-based data center REIT Digital Realty Trust (NYSE:DLR) or Scottsdale, Arizona-headquartered Healthcare Trust Of America (NYSE:HTA), which owns medical office buildings (MOBs) stateside.

Want Exposure To Real Estate Properties Without Added Effort? Consider REITs
 

Related Articles

Michael Kramer
NASDAQ Could Fall Another 13% By Michael Kramer - Jan 28, 2022 1

This article was written exclusively for Investing.comThe NASDAQ Composite has fallen sharply to start 2022, down nearly 13%. But don't expect the index to race back to record...

Want Exposure To Real Estate Properties Without Added Effort? Consider REITs

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
ali uçarlar
ali uçarlar Nov 11, 2020 8:18
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Great article, thanks. How do you forecast the impact of brexit on the UK Reits in mid term?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email