REITs

I've been involved in REITs for some time now in Medicx and NewRiver from your list above, and more recently in LXI and AEW Long Lease. These have proved worthy, if not wildly exciting income providers and are reasonably predictable investments. The other side of the coin of them having to pay 90% of their earnings in dividends is that they have little or no capital left to grow and consequently other than offering more shares (dilution) they need to borrow, so turning the spotlight on our old friend LTV. So look carefully at their leverage levels as this could be an issue in a significant down-turn. Of course as with all IT's they can be trading at a premium or discount to their underlying Asset Value.

Care homes;

McCarthy & Stone are interesting, obviously they have been writing off a lot of debt as part of the recovery from being in private equity (evil squid).  Right now they have gearing sorted at around 0% according to stockopedia. 

However buy to let legislation just kicked them in the knackers

"Dec 21 (Reuters) - Britain's biggest builder of homes for
retirees McCarthy & Stone MCS.L said on Thursday it had
requested an exemption from the government's proposal to set
ground rents to zero, but would work on strategies to maintain
profits if that effort failed.
The company's shares fell as much as 14 percent, hitting its
lowest in over three months. By 0948 GMT, the stock was more
than 9 percent lower.
The British government proposed in July that builders be
banned from selling leasehold homes in England and ground rents
on flats could be cut to zero, responding to public criticism
about price hikes facing leaseholders.
"This potential change to the structure of ground rents will
be immediately reflected in the cost of land secured for
development by McCarthy & Stone with a margin-neutral impact for
shareholders in the medium term," McCarthy & Stone said.
The company said it had made a "strong case" for the
exemption of retirement housing providers from such action, and
said it would request further details on possible exemptions. Dec 21 (Reuters) - Britain's biggest builder of homes for
retirees McCarthy & Stone MCS.L said on Thursday it had
requested an exemption from the government's proposal to set
ground rents to zero, but would work on strategies to maintain
profits if that effort failed.
The company's shares fell as much as 14 percent, hitting its
lowest in over three months. By 0948 GMT, the stock was more
than 9 percent lower.
The British government proposed in July that builders be
banned from selling leasehold homes in England and ground rents
on flats could be cut to zero, responding to public criticism
about price hikes facing leaseholders.
"This potential change to the structure of ground rents will
be immediately reflected in the cost of land secured for
development by McCarthy & Stone with a margin-neutral impact for
shareholders in the medium term," McCarthy & Stone said.
The company said it had made a "strong case" for the
exemption of retirement housing providers from such action, and
said it would request further details on possible exemptions. "

jester have you considered (or already have) an infrastructure fund? It may not be a direct property investment but it's got the commercial slant you are looking for. Utilities, transport (toll roads) etc..

E.G. there is First State global listed infrastructure. It's an OEIC. 10 years annualised performance for the B Acc class is 9.59%, which is 2.1% above the index annualised.

I myself want to get into REIT'S but investing through IT's doesn't suit me currently.

in a not wildly exciting vain have you looked at IT's such as Picton property income & F&C commercial property or TR property? For infrastructure IT's they have been trading at very high premiums for 3i or just high for the likes of HICL or International public partnership

There are some great Investment Trusts that I would like to invest with. But I regular save every month in sums of £25 per fund (to benefit from pound cost averaging) - I don't have any initial charges/fees when doing this with OEICS/ Unit Trusts. But I would have to pay 0.5% stamp duty and £1.50 dealing fee per transaction with IT's, which is quite significant on a £25 investment and would amount to a lot over time.

However my broker has capped charges on holding IT's so at the point when it becomes sensible (I only have a relatively small portfolio) I will liquidate my OEICS/UT's and buy IT's to keep charges low.

mentioned the property IT's as more traditional offerings over your student or big box choices(but that may not make them better for you) 2 own property and the TR trust is in builders etc and i think has some interests in Europe.The high premium on 3i is due to how popular this trust and others in infrastructure have become partly due to their yield.Not sure its 100% correct but in general open ended funds in infrastructure i believe will buy in to companies where the IT's may own the project i.e toll roads & bridges etc.
                   Others will explain better but IT's will trade on a premium or discount most of the time but some do control it to try and keep it at par -its a bit like the Ablrate SM where the better loans may get asked a slight premium.But thats not to say that trusts on a discount are bad or indeed may be a good buy especially if the discount narrows.You can even have a trust such as Impax Enviromental Markets be up about 150% over 5 years and about 20% for the year but on an average 11% discount for the last year

REITs have a valid place in a broad investment portfolio, especially for those looking to generate a dependable income stream from a diverse range of investments.  If you are looking to get rich quickly then gamble elsewhere, but if you wish to harness the power of compounding dividend income then REITs can be very useful.

The main point of note for retail investors is that REITs are obliged to pay 90% of their income out as dividends to retain certain tax advantages.  Most of the major listed property companies converted into REITs back in 2007 - hence Land Securities, British Land, Hammerson, Segro (back then it would have been Slough Estates & Brixton Estates) and others all became REITs.  Segro is the market darling of the moment owing to its large exposure to logistics warehouses of the type favoured by online retailers.

REITs are shares first, property investments second.  In the short term they can perform in a manner that is more correlated to the stock market than property markets.

The primary risk is rising interest rates, and REITs have a three-fold exposure. Firstly they are big users of debt financing, so bond markets matter to their future profitability.  Secondly, commercial property valuations are underpinned by a presumed yield.  As yields rise, values drop.  Yes, rents can rise to offset rising yields, but usually not enough. Thirdly, they are income investments, and as rates rise so the attraction of property vs cash diminishes as investors find leaving money in the bank less punitive in real terms.

You can think of a REIT as a loose basket of secured corporate bonds with some development upside - each lease has fixed-income characteristics and if a tenant defaults the landlord can re-let or sell the property.  The advantage overlooked by many is that institutional long leases in the UK are often linked to inflation, so there is a degree of inflation hedging available that is currently so expensive to source in the index-linked gilt market (where inflation will need to exceed 2% just to avoid a negative return).

Why a REIT over direct investment in a commercial property?

• Liquidity - you can always sell the shares, even if you may not like the price
  
• Diversification - much less concentrated exposure to tenant default
  
• Gearing - REITs can leverage more cheaply than you can, and commercial mortgages are cumbersome
  
• Convenience - you don't have to manage the tenants
• Development project upside (varies by REIT)
  

The majors:
Land Secs - the largest and a bit of a slow-moving supertanker, 62% London by value.....
Brit Land - lots of office exposure, especially financial district, plus some retail.  Not a bad contrarian bet if the current Brexit fears prove excessive.
Hammerson - large shopping centres with some European exposure (& currently acquiring rival shopping reit INTU)
Segro - logistics warehouses, lots of Heathrow exposure, some european, had a very good run
Great Portland - more London exposure

There are some good smaller sector specialist REITs that are worth a good look - Derwent, Shaftesbury, Workspace to name a few.

Then there are the funds like F&C Commercial and portfolios run by the major fund management houses - plenty of comment elsewhere on these.