Favoured REITS and Property/Infrastructure ITs

My advice is stay clear of REITs including the one that gets promoted in this forum. Even the honest and totally transparent ones are for sophisticated full time investors. They are like absolute return funds with their eye watering hidden and upfront charges, finding a good one is like finding the Koh-i-Noor in a diamond mine.

Thanks for linking to the BBOX page on HL.

HL. shows annual costs of 2.09%.
Sharepad shows annual costs of 1.6%.
Which is correct? I know not. But I understand that the way in which those costs are calculated is the subject of much discussion in the wider investment trust world.

Comparing the 5 year data on HL. with my own experience, one of my tranches of BBOX, purchased in Feb 2019 and held since then shows IRR = 7.6% pa.
The current yield is 4.8% pa and it is the dividends that make the difference.

I have seen various figures of around 2.9% pa for the average annual CPI over the last 10-15 years, so I am content with that level of return.

The assets of BBOX are listed, complete with descriptions, at:

www.tritaxbigbox.co.uk/portfolio/

As I wrote last week, I can drive around the UK and eyeball the assets...
What I cannot see is how well BBOX manages its debt, especially as it is now taking over UKCM. We shall see.

When discussing REITs, one of the usual culprits mentioned is PHP which owns lots of medical facilities in the UK and Eire.
Last weekend's FT had an article on the CEO, Mr Hynam, who runs the company.
In the article, he claimed that almost 100% of the current debt is fixed for 7 years and that the inflation linked leases would kick in soon, improving profitability.
With a bit of luck, that will also hold true for BBOX.  I do not hold PHP.

I also note that a new REIT is coming to market. It is claimed that the REIT wants to raise £500m which it will invest in assets trading at a discount.
As most REITs claim much the same thing, I am surprised to find yet another competitor entering the fray but, hey, what do I know?

Dr Google will help: Special Opportunities REIT

REITs aren't for everybody, especially with the tax issues but, all in all, the world of REITs looks as if it might survive the savaging of the last 2-3 years.

MW

I couldvread it here
www.msn.com/en-gb/money/other/questor-this-new-property-fund-is-profiting-from-the-fallout-from-liz-truss-s-mini-budget/ar-BB1nHgHc?ocid=finance-verthp-feeds

I have been investing REITs for years, all in all I am up but not huge returns mostly because they are at all time low. I mostly go for 4 types of REITS warehouse, supermarkets, healthcare and ones which are likely to be liquidated. I guess like other shares and comedy the secret is timing or perhaps just luck. I hugely increase my holdings about a year ago, some capital gains since then but being paid well in dividends while I wait for a recovery which should come when interest rates go down. Mostly held in ISAs and SIPP due to 20% standard rate tax on the PID dividends although some dividends are not PID.


So far I have made a good return on EPIC after liquidation, made 10% capital gain and around 8% yield while holding and also made on the takeover of LXI. I hold API, ASLI and BCPT because of the threat of liquidation with the chance of more cash being returned than the shares are currently worth due to large discounts. My largest holding is SUPR Omni channel properties, over 8% yield, wault of around 8 years, discount around 20%, rent return 100% most rents index linked to inflation but capped at around 5% but very little if any chance of takeover/liquidation but also very little chance rent defaults. Bought HOME REIT in a share raise but sold out soon after for a profit as I did not like the idea of collecting rents from the less well off as they have a tendency not to pay and difficult to evict, now it is in a bad state with shares suspended. New River REIT is also one of my loses, well run company but the wrong place at the wrong time i.e. shopping centres during lockdown. Also hold LMP, BBOX, SHED, AGR, PHP, SREI, UTG. SREI and UTG do not fit my profile but I like SREI because it is a steady small REIT and its debts are long term at fixed low interest rate and UTG because of the growing market in student accommodation also can be rented to government for asylum seekers. Most others are in a growing market as well due to the increase in UK population therefore need for more supermarkets, warehouses for home delivery etc.


Before the interest rate rise a lot of REITs where trading at premiums and went to the market for more capital, during this time I bought a lot of these shares via Primary Bid (with my P2P cash as I got out of all my P2P investments), the share price would go down close to the offer price and then go back up in the next few months when I would sell out most of my holdings, I did this a number of times with Super market REIT and some others. I really miss Primary Bid now it is longer available to the retail investors.


A post I made on a REIT share chat site.


IMO the crash in the share prices was caused a lot because of poor regulation of LDIs, pension schemes used these to get cash which they invested in REITs especially while they were expanding i.e. shares raises. After the Gilt crash they needed to sell the REITs to cover liabilities and since then there is just not enough cash around/willing to take up this shortfall. Sure REIT share prices would have gone down anyway but not to this extent. We are now looking at a situation where a lot of people are nursing loses and desperate to reduce these so the only way out is to sell off all the properties in the REIT and return funds. When interest rates drop eventually the prices will go up and pressure reduced to shut down but this seems to go back by 1 month every month. For now make to most of it, high yield, potential capital growth or more money returned if closed down. The REITs should take some of the blame, instead of looking for more cash to expand they could have paid of some debt and used some new debt to buy back shares along with a few property sales when prices crashed, this would reduce to size of the REIT market place and increase NAV. At some point after a number of REITs are folded, interest rates reduced there will be a better balance between REITs and cash available/willing to invest.



What does the future hold? A very difficult question but IMO

There is a shortage of supermarket, warehouse and other sites rented by REITS and will get worse as it is not practical for the REITs to build or buy many more sites due to the discounts and interest rates as well as difficulty with finding new sites especially as the rush to build new homes and planning permission so will help with rent increases and property values.

A number of REITs will be liquidated return more cash than the market capitalisation due to large discounts and IIs getting fed up waiting for the discounts to narrow, a lot of the properties bought by PE funds. In time those that survive as the interest rates go down the SP will increase, the NAVs will increase back to the pre high interest rates levels or perhaps or even increase more due to catching up with inflation and the discount will reduce. Also expect the dividends to slowly rise as interest costs reduce and rents go up. But who knows what new taxes we will get under Labour so a concern. However most important thing is DYOR.

Don't know much about Special Opportunities REIT but virtually all REITS are at a decent discount to NAV there is a lot to chose from and there is not much appetite for new money for REITs at present, also I assume they are trying to raise cash at NAV as it is a new REIT which is a big ask in the current climate. It looks like they are targeting distressed  sellers but I think a better opportunity exists for a company investing in REITs likely to be liquidated. Also property sales from REITs seem to getting around NAV a lot going to Private Equity so not sure there will be many sellers for quality property at a distressed price. It is the old LXI management team who did a good job with LXI but have nothing to do now. 

As mentioned if you buy into an existing REIT there is a good chance it will either be taken over like LXI or wound down like EPIC, both return significantly more value than if they just carried on. Some people are unhappy about this situation as the number and therefore choice of REITs is declining but there are still a number of well run REITs to move your money to if the one you are invested in is liquidated.

Since my last post ASLI as passed a resolution to liquidate so will start to see return of capital at some point which no doubt will end up being significantly more than the shares are worth but might take up to 2 years.