Cheap REITs

[brightncheerful]

If it's high yielding ( a consequence of sp) you're looking for, then the following might be of interest:

Target Healthcare REIT
Civitas Social Housing REIT
Triple Point Social Housing REIT

Each specialises in asset categories such as care homes, social housing and such like.

Because the roroperties are out of the ordinary they tend to be ignored by most buyrers but actually they have a lot more going for them, For example, long leases which compares very favourably with standard commercial property leases which nowadays is on short / shorter leases. Mostly if not all the rents are index-linked (some with cap and collar) or fixed uplifts.

Currently, the three I've mentioned sps are at 40-50% of the NAV.

DYOR

[Dod101]

If it's high yielding ( a consequence of sp) you're looking for, then the following might be of interest:

Target Healthcare REIT
Civitas Social Housing REIT
Triple Point Social Housing REIT

Each specialises in asset categories such as care homes, social housing and such like.

Because the roroperties are out of the ordinary they tend to be ignored by most buyrers but actually they have a lot more going for them, For example, long leases which compares very favourably with standard commercial property leases which nowadays is on short / shorter leases. Mostly if not all the rents are index-linked (some with cap and collar) or fixed uplifts.

Currently, the three I've mentioned sps are at 40-50% of the NAV.

DYOR

Often they are cheap for a reason. That is mostly at the moment to do with a share price that reflects lower NAV. I am concerned about borrowings and the cost thereof, not particularly for those mentioned but for REITs in general. Most are protected in the short term but when their borrowings come up for renewal the question is where will interest rates be then. Some REITs like say PHP will probably always get relatively lower rates on account of their very secure income but others are likely to be less fortunate.

Dod

[Alaric]

Often they are cheap for a reason.

The sub-sector as a whole may have been affected by the problems at Home REIT.

https://homereitclaim.co.uk/

Home REIT’s share price fell by approximately 70% in the calendar year through to the end of 2022. On 3rd January 2023, the company announced a temporary suspension to the listing of its shares. Many investors have either realised losses on their investments or are sitting on losses if they still hold their investments.

[monabri]

Target Healthcare lets housing to care home operators. The leases are linked to RPI although there are caps to the increases. I thought that care home operators were struggling ; a search using Google reveals lots of reports broadly titled " care homes to close"

England
https://www.carehomeprofessional.com/ca ... udy-finds/
https://www.liverpoolecho.co.uk/news/li ... 0-26130254
Scotland
https://www.inverness-courier.co.uk/new ... es-311911/
Wales
https://www.leaderlive.co.uk/news/23291 ... b-confirm/
https://www.northwalespioneer.co.uk/new ... y-warning/

The new care homes I see being built are 'posh' ones with very high charges, businesses aimed at elderly well heeled folk. Maybe the care home businesses can eke out a good profit there for a while but for how long?

If there are no customers then there is no business. I want to own a share in a care home businesses as much as I want to be in one

[mark88man]

Thank you monabri - I think you just killed my investigation dead - I am in transition from a growth focus to a higher (but not total) income focus. I have a lot to learn (in either focus) but your post rings very true and matches our local area

[Dod101]

Thank you monabri - I think you just killed my investigation dead - I am in transition from a growth focus to a higher (but not total) income focus. I have a lot to learn (in either focus) but your post rings very true and matches our local area

There are plenty of decent income shares around, but I would be cautious about the REIT sector in general.

Dod

[monabri]

Looks like Target Healthcare ( THRL) was unprofitable last year so that might have a bearing on the shareprice and one might care (pun intended) to take a view on whether it was a one off bad year and, if it wasn't, what might happen to the anticipated juicy dividend? Definitely a case of DYOR.

[monabri]

Thank you monabri - I think you just killed my investigation dead - I am in transition from a growth focus to a higher (but not total) income focus. I have a lot to learn (in either focus) but your post rings very true and matches our local area

Sorry, didn't mean to put you off! I picked THRL purely at random and then did no more than a few minutes research and found that it reported a loss..not a good start for a dividend hunter ( nor any investor). Clearly one would then need to start to investigate further...it might be a one off bad year. I have no experience in what THRL does (and I don't wish to sample the goods ) so all I can do is provide some thoughts on what I read in the press and hear on the news.

Perhaps BnC knows the market better and I'm wrong. Those 'yields on offer' were on the high side and would warrant more research.

[BullDog]

A counter argument might be that the nation is growing older. Younger people I think are less inclined to look after elderly relatives than historically was the case. People are generally living longer than they used to. State or local authority provided care is none existent or awful.

So, where are older people going to be cared for?

I don't hold REITs in the care sector. But I wouldn’t be quick to rule it out of a diversified income portfolio completely.

[Dod101]

A counter argument might be that the nation is growing older. Younger people I think are less inclined to look after elderly relatives than historically was the case. People are generally living longer than they used to. State or local authority provided care is none existent or awful.

So, where are older people going to be cared for?

I don't hold REITs in the care sector. But I wouldn’t be quick to rule it out of a diversified income portfolio completely.

I think the upmarket ones are where to go. They will not get local authority (under) funded patients and I should think will probably be able to pay sufficient to get the best quality staff.

The others are faced with a perennial staff shortage and more or less loss making local authority patients (or so we are led to believe anyway)

Dod

[BullDog]

A counter argument might be that the nation is growing older. Younger people I think are less inclined to look after elderly relatives than historically was the case. People are generally living longer than they used to. State or local authority provided care is none existent or awful.

So, where are older people going to be cared for?

I don't hold REITs in the care sector. But I wouldn’t be quick to rule it out of a diversified income portfolio completely.

I think the upmarket ones are where to go. They will not get local authority (under) funded patients and I should think will probably be able to pay sufficient to get the best quality staff.

The others are faced with a perennial staff shortage and more or less loss making local authority patients (or so we are led to believe anyway)

Dod

So the question regarding Target Health Care REIT appears to be more about which sector of the market it operates in. I am not invested in Target or it's peers. I do recall looking at the portfolio of property owned by Target a while ago. None of it looked especially down market. As always, best to DYOR.

[airbus330]

I hold Target, Impact and Civitas in this sector. Bought as income generators. I'm reasonably confident that Target and Impact are well run in a sector which will recover once interest rates start to normalise. I'm less confident about social housing reits and the more I read about them, the more uncomfortable I am with the standard of management. I'm not inclined to exit reits as they have had a rough year and are just beginning to show signs of a recovery, but neither am I buying more, even at these heavy discounts.

[Dod101]

I hold Target, Impact and Civitas in this sector. Bought as income generators. I'm reasonably confident that Target and Impact are well run in a sector which will recover once interest rates start to normalise. I'm less confident about social housing reits and the more I read about them, the more uncomfortable I am with the standard of management. I'm not inclined to exit reits as they have had a rough year and are just beginning to show signs of a recovery, but neither am I buying more, even at these heavy discounts.

The trouble for interest rate hopes is that they have normalised. It was the last decade or so that was so out of kilter. We should not be relying on essentially free money to survive.

I will not exit REITs either but then I only hold PHP and Segro, both of which I am reasonably happy with and I guess both could be called (relatively) cheap. PHP has quite high debt though.

I would not dream of holding social housing REITs and as I said earlier, I would only hold the upmarket care home REITs and then only at a push.

Dod

[tjh290633]

I have PHP, Segro and British Land, each in a different sector. PHP effectively gets its income from the NHS, but keeps buying other operators.

Segro is into warehousing, which is fairly buoyant because of the shift to online shopping.

British Land is more into office properties and some retail property.

I think that is enough diversity. Because of the low yield, Segro has missed out on topping up opportunities of late. The other two are disqualified because they are up against my "share of portfolio cost" limit. That is explained in my posts in viewtopic.php?p=585297#p585297

TJH

[Dod101]

I have PHP, Segro and British Land, each in a different sector. PHP effectively gets its income from the NHS, but keeps buying other operators.

Segro is into warehousing, which is fairly buoyant because of the shift to online shopping.

British Land is more into office properties and some retail property.

I think that is enough diversity. Because of the low yield, Segro has missed out on topping up opportunities of late. The other two are disqualified because they are up against my "share of portfolio cost" limit. That is explained in my posts in viewtopic.php?p=585297#p585297

TJH

I gave up on B Land and Land Secs a long while ago and never made any money from them. I think the office story has got some way to run because of the relatively long leases usually involved. HSBC, and I have no doubt many others with a large amount of office space, are looking to possibly reduce it as leases expire and I think that will hold companies like B land back.

Dod

[SKYSHIP]

I have always specialised in the REIT sector. As I state in the Header to the CP+ thread, the commercial property thread over at ADVFN:

“The commercial property sector can provide rich pickings for VALUE investors prepared to spend a little time analysing the principal metrics of Yield, NAV discount and LTV; then delving into the detail of financing, tenant mix, lease lengths, sector spread, geographical spread.
The sector can be a profitable and to a degree a predictable sector to trawl – provided you can call the savage bear markets that can and do overtake the sector from time to time!
It is a sector relatively immune to the conventional trading company risks of competitor action, margin erosion, contract losses and all the other routine and unpredictable problems that so beset industrial companies.”

Well, since Q3’22 the sector has endured one of those savage bear markets, though on this occasion steep but mercifully short. The sharp increase in interest rates rapidly undermined valuations as surveyors found a sudden lack of transactional activity upon which to base their estimates. Due to the political and economic upheavals in H2’22, they valued in seemingly over-cautious mode.

The CPRE monthly stats and the Q1’23 NAV valuations so far revealed, suggest we have turned the corner and NAVs are improving, with sentiment suggesting more to come throughout ’23.

Personally I won’t touch the quasi residential sector suggested above; but I find plenty of value elsewhere:

# API – 55.5p – Discount 34.6% - Yield 7.21%
# EBOX – 64.9p – Discount 46.8% - Yield 6.81%
# SERE – 83.4p – Discount 29.3% - Yield 7.85%
# SREI – 46.65p – Discount 24.8% - Yield 7.02%

The two middle ones both have their portfolios in continental Europe. One has almost the highest discount in the sector; one almost the highest yield.

Mark88man - might I suggest you start your research with those two. There are excellent Presentations available on both - see the relevant ADVFN threads.

[tjh290633]

I have PHP, Segro and British Land, each in a different sector. PHP effectively gets its income from the NHS, but keeps buying other operators.

Segro is into warehousing, which is fairly buoyant because of the shift to online shopping.

British Land is more into office properties and some retail property.

I think that is enough diversity. Because of the low yield, Segro has missed out on topping up opportunities of late. The other two are disqualified because they are up against my "share of portfolio cost" limit. That is explained in my posts in viewtopic.php?p=585297#p585297

TJH

Further to that, I have just looked at the records of the three shares.

PHP has a negative IRR, -5.53%. First bought in 2020 at 152p, dividend 1.28p/qtr. Topped up 6 months later at 149p, and a month late at 143p. Topped up twice more in Oct 2022, at 112p and 102p, dividend now 1.68p/qtr. Yield currently 6.15%.

Segro first bought in 2007 at at 544p. In 2009 there was a 12 for 1 rights issue to buy Brixton Estates, a 10 to 1 consolidation and an open offerat 285p, which I took up. Topped up in 2011 at 223p, dividends being 9.9p final and 4.9p interim. Rights issue in 2017 at 519p, then trimmed back in 2018 by 25% when overweight at 590p, again in 2019 at 887p, and in 2020 at 966p. Price subsequently rose to over £12 but has fallen back to the current 825p. IRR is 8.53% and current yield is 3.2%, dividends now half-yearly at 8.1p and 18.2p.

BLND first bought in 2010 at 473p. Topped up in 2013 at 5.51p, again in 2016 at 610p, in 2019 at 535p and in 2020 at 380p. Topped up twice more in 2022 at 409p and 326p. Quarterly dividends at 6.5p when bought and currently interim at 11.6p following a similar final. IRR 3.3% and yield 5.80% at the current price.

SGRO was next in line for topping up, but has been edged aside by SMDS. Things can change quite rapidly..

TJH

[stevensfo]

I have always specialised in the REIT sector. As I state in the Header to the CP+ thread, the commercial property thread over at ADVFN:

“The commercial property sector can provide rich pickings for VALUE investors prepared to spend a little time analysing the principal metrics of Yield, NAV discount and LTV; then delving into the detail of financing, tenant mix, lease lengths, sector spread, geographical spread.
The sector can be a profitable and to a degree a predictable sector to trawl – provided you can call the savage bear markets that can and do overtake the sector from time to time!
It is a sector relatively immune to the conventional trading company risks of competitor action, margin erosion, contract losses and all the other routine and unpredictable problems that so beset industrial companies.”

Well, since Q3’22 the sector has endured one of those savage bear markets, though on this occasion steep but mercifully short. The sharp increase in interest rates rapidly undermined valuations as surveyors found a sudden lack of transactional activity upon which to base their estimates. Due to the political and economic upheavals in H2’22, they valued in seemingly over-cautious mode.

The CPRE monthly stats and the Q1’23 NAV valuations so far revealed, suggest we have turned the corner and NAVs are improving, with sentiment suggesting more to come throughout ’23.

Personally I won’t touch the quasi residential sector suggested above; but I find plenty of value elsewhere:

# API – 55.5p – Discount 34.6% - Yield 7.21%
# EBOX – 64.9p – Discount 46.8% - Yield 6.81%
# SERE – 83.4p – Discount 29.3% - Yield 7.85%
# SREI – 46.65p – Discount 24.8% - Yield 7.02%

The two middle ones both have their portfolios in continental Europe. One has almost the highest discount in the sector; one almost the highest yield.

Mark88man - might I suggest you start your research with those two. There are excellent Presentations available on both - see the relevant ADVFN threads.

# EBOX – 64.9p – Discount 46.8% - Yield 6.81%

Do you mean Tritax EuroBox (BOXE.L) ?

Steve

[mark88man]

Skyship - I do hold SERE (following a post from, I think, yourself) - I moved the drawdown element of my pension from my company fund based scheme to HL and a portfolio of ITs. SERE replaces a generic corporate REIT-a-like

I am preparing to retire hence the beginnings of an income strategy which I will use to derisk decumulation while I wait (3-4 years) for my DB to kick in without reduction

[MDW1954]

Do you mean Tritax EuroBox (BOXE.L) ?

Steve

Tritax EuroBox has two listings: EBOX, quoted in pounds, and BOXE, quoted in euros.

Some brokers deal in one, some in the other, and some deal in both.

MDW1954