For most people, home is where the heart is, making real estate one of the most important asset classes for many investors.
Strong accelerations in real estate prices over time often make headlines on both sides of & # 39; the pond & # 39 ;, both in the US and UK, as well as in many other countries. Investing in purchase-to-rent or rental properties has also become quite popular in recent decades.
Some, however, will not be favored as landlords or landladies. It can be difficult and time consuming. Obtaining a mortgage, managing the properties, collecting rent, working with real estate agents, finding tenants and property maintenance can easily turn into a full-time job.
While investing in traditional physical assets may sound complicated, many financial planners see it as really beneficial to have real estate exposure as part of a diversified investment portfolio.
What can those investors do who may not have the capital or the time to build or maintain a real estate portfolio? They could easily buy publicly traded Real Estate Investment Trusts (REITs).
Previously we discussed and reviewed (ETFs), including the Vanguard Real Estate Index Fund ETF Shares (NYSE :), the Real Estate Select Sector SPDR Fund (NYSE: ) and the iShares Residential and Multisector Real Estate ETF (NYSE 🙂 .
REITs can provide exposure to residential, retail, office or industrial properties, as well as more specialized real estate such as cell towers or data centers. Today we focus on British Land (LON 🙂 (OTC 🙂 a REIT that is part of the UK index.
UK-based REITs operate in a significant sector
The REIT regime was introduced in the UK in 2007, with real estate investment funds owning and managing properties on behalf of shareholders. By law, UK-based REITs are required to distribute 90% of their taxable profits to shareholders.
The London Stock Exchange highlights the segment by saying, "There are over 50 REITs with a market capitalization of over $ 70 billion" listed on the stock exchange.
The UK property market is one of the most important sectors of the economy. More than 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 real estate portal Rightmove (OTC 🙂 the UK saw a:
“[N] new national record for the average price of real estate entering the market, with a monthly increase of 1.1% (+ £ 3,534). Prices are now 5.5% (+ £ 16,818) higher than a year ago, the highest rate of increase in more than four years, with Rightmove now predicting annual growth to peak at around 7% in December. "
British Land
The group has nearly £ 15 billion (approximately $ 20 billion) in assets under management. The occupancy rate and annual rent are 96.6% and £ 516 million ($ 683 million) respectively.
The commercial space in London, mainly around Broadgate, Regent & # 39; s Place and Paddington Central, comprises more than 60% of the total portfolio. Retail makes up nearly 35% of the portfolio, but management intends to "reduce this business to 25-30% of the total in the medium term"
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It is currently developing a new urban center of more than 53 acres in Canada Water, opposite Canary Wharf, one of the most important financial districts in Europe and worldwide.
In 2020 the group suffered a serious dent in its growth and activities. In late May, British Land announced the full year for the year ending March 31. It reported losses on lower rental income. The pre-tax loss was £ 1.1 billion ($ 1.32) and net rental income decreased 10.1%.
Even before the coronavirus pandemic reached the UK in late February, British Land, like many other REITs, was troubled by the fear of Brexit, the UK's departure from the European Union. Due to the exposure to commercial real estate, the long-predicted death of brick-and-mortar stores hadn't helped stocks either.
Since the beginning of the year, BLND shares have fallen by more than 27%. On November 10, it closed at 464.90p ($ 6.19 for US stocks). In early October, it restored the 5.1% dividend yield that had been suspended earlier this year. The group's price-to-book ratio (P / B) of 0.61 could appeal to value investors, with a number below 1.0 indicating a potentially undervalued stock.
On November 18, the group will publish half-year results. Potential investors may want to analyze the statistics before putting capital into the REIT. Finally, British Land aims to "deliver a net zero carbon portfolio by 2030".
Bottom Line
Ownership is a tangible asset most of us know. Many investors in the US, UK and other countries invest in real estate by including REITs in their portfolios. They are cash, easily tradable on exchanges. They typically offer higher returns than bank savings accounts and also have the potential to generate capital growth.
Investors seeking exposure to US-based REITs can also conduct research in Atlanta, Georgia headquartered in Americold Realty Trust (NYSE 🙂 specializing in temperature-controlled warehouses, in Chicago, Illinois. Brookfield Property REIT (NASDAQ 🙂 focused on commercial real estate, cell tower headquartered in Houston, Texas REIT Crown Castle International (NYSE: ), data center in San Francisco, California REIT Digital Realty Trust (NYSE 🙂 of Scottsdale, Arizona with headquarters Healthcare Trust Of America (NYSE 🙂 which owns medical office buildings (MOBs) in the United States.
