I first invested in the UK REIT sector (though it wasn't called that then!) in 2003 via Tr Property . For anyone that wants exposure to the UK propery sector I can recommend this trust as a well managed and diversified vehicle for doing so. I also recommend studying their recent full-year and interim reports, which I find rather insightful - and don't pull any punches, even at the expense of deterring potential investors!
I exited most of that investment by early 2007, and finally exited completely early this year, after a strong rebound from the lows. In 2007 I performed this analysis , reaching the conclusion that the sector wasn't cheap. With all the market turmoil, I hadn't rerun the analysis, as the underlying figures were subject to so much uncertainty.
Now that we have seen some recovery in the sector and reported stabilisation of property values, I thought it would be an opportune time to re-run the analysis and see whether value was available. So, I post below my current calculations and then my conclusions based on those. I have chosen 3 of the largest REITs to analyse:
I have done my best to compare "like-with-like" but must warn that I may have missed "special factors" that may make the comparison unfair. Hence I would advise readers to perform their own analysis/checks and not to rely too much on my calculations. OTOH, the ratios and the trends seem reasonably consistent between the companies which suggests to me that I'm not too wide of the mark.
The Figures
EPIC | BLND | BLND | BLND |
Date (1) | 22/05/2007 | 16/08/2007 | 18/08/2009 |
Portfolio Value now | 13,997 | 13,683 | 8,178 |
Portfolio Value year ago | 11,678 | 12,185 | 12,288 |
Net rental income | 561 | 566 | 552 |
Average net rental yield (2) | 4.4% | 4.4% | 5.4% |
Net debt | 6,671 | 6,274 | 4,775 |
Net Interest Paid (3) | 313 | 314 | 168 |
Effective interest rate | 4.7% | 5.0% | 3.5% |
Equity % |