Or are they.
In my opinion most areā¦overdone falls and in a lot off case a read across. For instance the social housing sector is taking real kicking based mainly on the disaster of Home reit.
So straight off another looser from triple point!
Another social housing disaster?
Home Reitā¦definitely a disaster
Civitas not in my opinion
Triple point social housing?
As with home reit they are having problems with rental collection. Some housing associations in this sector are to small and there are unnecessarily large amount of them. But i would not describe its problems as anything like that of home reit.
Lots of debt but long term low interest.
9.5% dividend
50% discount
Best information i could find was on Quotedata but it opens in my Quotedata app. I am not sure if you can read it without the app.
Eitherway this is the search phrase i used.
Iām sure thereās some money to be made but the Home Reit saga shows itās a minefield of a sector.
Short- and long-term performance has been woeful.
Iād sooner buy trusts in other AIC property sectors such as logistics, commercial and health care, if I can get them at fair prices/decent discounts.
I donāt know the political environmental in UK, but I suppose the risks are similar across countries, the residential REITs are more prone to political risks than other REITs types.
For example, in Portugal, due to higher inflation rates and higher housing prices (renting and buying), the socialist party in Government, has recently mentioned putting caps on the rent prices, and forcing the private homeowners of vacant houses to rent their houses. The goals are to put more houses and at more affordable rent prices in the housing market.
Populist left-wingers, are also chasing the foreign investors, particular and institutional (funds and asset management firms).
Bottom-line, the Governments can freeze or limit the house rent prices, create more taxes on houses, and/or create distortions on the residential market. Between the choosing the renters and the investors/homeowners, Governments tend to choose the highest number (voters).
Odd you should say that triple point social housing has decided not to increse rent in line with leasing requirements (cpi) but putting a cap of 7% on rent increases.
A bit of both really shareholders are still gaining and the customers who could be called the housing associations but are really the government/tax payer
The investors/shareholders who want to maximize their returns, could sell their shares and go to a more shareholder oriented management. Provoking a downfall on the REIT/IT/fund prices.
The shareholders are mostly other asset management firms, pension funds, endowments, etc, including public pension funds and sovereign wealth funds, and they are pressured to give the best result possible to their customers. If not, they are also dismissed.
Itās a chain reaction.
(IMHO, itās the Government function to help the poor/low income people, not the private companies or homeowners. As they are already paying taxes so the Government can distribute income and help the needed. And higher prices means higher taxes, in the end, the State will have more money to help the people in the need.)
Also they used the phrase sustainable as in they didnāt think could get away with rent rises like that.
Also its the housing associations who are agreeing to the leases but they are not paying the rent council or government are paying that. So they can say thats not a fair rent.
Moving on investment trusts in the private equity sector (i am excluding growth capital)
Almost all there Intial investments are in profitable small and medium size companies.
Most are bought outright. They invest in them to grow them in the main replacing some or all the directors.
Often bringing in highly experienced directors.
Then after roughly 4 to 5 years listing or selling on to trade buyer.
On average about 20% above there portfolio valuations.
So if the total NAV is 100 million then they should be able to sell the portfolio for 120 million.
Now we come to the discounts.
This is where people look at a discount and assume it will go to par at some point.
Symphony International on 54% discount and 3i group at par.
3i is cheaper than Symphony. The discount for symphony is not that far off what you would expect for them. A product of iffy directors and asset manager.
So not the best choice as a comparison!
Pantheon International is a better comparison. Its presently on 45% discount. But you will not find it on a better than 20% discount in the past. I was informed that it once went to 15% discount.
On the otherhand 3i is normally on 20%+ premium. Someone on another site who has owned it for 20 years said it once was on 85% premium.
All said and done still loads of bargains in this sector but expect a bumpy ride. Volatility is the name of the game in this sector.
Investing in social housing to me is a no go zone. You are basically investing in properties with people who are on lower incomes and likely to default on rental payments even when they receive social governmental funding.
What if I said we were helping to fund more social housing, which carried lower rents but generated a reasonable return. It benefits both those on low wages, and us as it could be considered āethicalā investing?
Personally, the U.K. system is very fractured, broken may be a better term. The second home tax is backfiring as itās making it more expensive for landlords to invest and rent out properties, so in turn there are less rental properties in the market and the rents are increasing as a result due to lack of supply.
Property funds are also closing. We actually need more closed end property funds, investing in housing. None of this āstudent housing = affordable housingā crap.
Similarly paying your rent on time for years should be part of a mortgage affordability calculation. Banks need to offer longer term loans, with lower monthly payments that help those on low wages afford to buy a property, and build up capital in their home. If the two were combined - REITs with tax incentives to help people on this journey, things would be better.
Anyhow sorry about my rant but thatās my view - set up in the right way, it can be of benefit to all.
You certainly have a very good point. However student housing is needed. Uni students come out sholdering a huge debt burden on their hands and government needs to change this ASAP. Free Education needs to be reintroduced like other countries. Educated people (with little or no debt) will only benefit the country and in turn are much more likely to be able to afford to buy and rent in the property market.
Yeah, I wouldnāt touch the social housing Reits with a bargepole, mostly for this reason.
That said, I do have some exposure to housing generally through TRY. Vonovia is its top holding which makes me a little uncomfortable.
I like this trust though as it has a good long-term track record, a well-regarded manager, a 5%ish yield and itās a one-stop shop for relatively diversified property exposure.
Plus thereās a so-called double discount ā 10% on the trust itself then some massive discounts on its underlying Reits.
I do sometimes wonderā¦ if no one wants to invest in a sector, it might be at āpeak pessimismā and it might be the best time to invest in the sector
Just readings the posts above from everyone, have we maybe reached that time yet?
Maybe not quite.
Iām not following the BoE monetary policy, but in the US (Fed) and EU (ECB) interest rates environment, I would risk to say that their interest rates are almost near the top (maybe one more hike), reaching a plateau, if not already there.
When reaching the plateau, a lag would exist (as all rates measures made by the Central Banks), before the effects in the real economy (more negative impacts in real estate). Then the real estate prices would estabilize, unless a depression arrives (or other major bad event).
REITs are my 2nd biggest slice after tech, and this year I doubled down on some of those positions.
āREITā is an incorporation structure in the end and none of my holdings account for home or traditional office/mall space. Cellular tower operators and even data centres are able to structure as a REIT.
These REITS who are not traditional brick and mortar retailers did not get hit by inflation/interest rates. But since wall street and institutional investors look at things with a blanket āsectorā approach their prices are hard hit as well.
Some examples of these can be CCI which ārentsā 5G towers, so it has 100% occupancy and due to price cuts it was yielding a comical 7% sometime this year. ARE is another one that rents bio-science labs and specialised technology offices. In Jun SEC filings it had a 93.6% occupancy rate and itās price was down almost 40% YTD. (Disclaimer I have these shares bought a lot more this year )
On the other hand there are two conditions Iād like to stress for incorporating as a REIT
Pay a minimum of 90% of taxable income in the form of shareholder dividends each year
Have no more than 50% of its shares held by five or fewer individuals
The first point means as long as their properties are well occupied they are generating income and if you are not planning about selling some next month and year, you really should not care about current prices anyway. (Dare I say, lower prices with the same dividends are still more appealing)
Second point means, they cannot be structured as stupendously as some other giants today like Alphabet or Meta. Governance will be more likely in favour of shareholder so a single person cannot go invest billions in some random venture and loose it all.
)