# REITS General opinions.



## TeslaTim (22 Mar 2022)

Hi I  know discussing specific shares is not allowed but in general what do people think of REITS as an investment option.


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## joe sod (22 Mar 2022)

They are good steady  investments like utilities,  generally they rise a bit every year and you get your dividend payments.  They don't follow the property market per se ,the huge inflation in the housing market is not particularly reflected in reit valuations. Because reits are traded on the stock markets well then the stock market gyrations are a bigger factor than property market stuff. They are also affected somewhat by political stuff  , they got walloped in 2020 after the SF election result but have fully recovered from that and covid now


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## AJAM (23 Mar 2022)

I believe that the majority of the returns from investing in REITS will be in the form of dividends (as opposed to capital appreciation). Dividends are taxed at your marginal rate. So REITS are a great investment for Irish people in the lower tax bracket. But a very tax inefficient investment for Irish people in the higher tax bracket.


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## galway_blow_in (28 Mar 2022)

I was very pleased to see Hibernia being bought out last Friday , I bought fairly heavily into it in February 2021 

agree about REIT,s not tracking the on the ground property market , they do not , they are income vehicles , are they a better investment than direct property ?

I dont know , probably are for people who dont want hassle of property management


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## Horatio (28 Mar 2022)

galway_blow_in said:


> I dont know , probably are for people who dont want hassle of property management


Yes, exactly.


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## joe sod (15 Apr 2022)

It's obvious that the private market see that reits are undervalued by the stock markets and are moving to take them private. Already green reit and now hibernian reit have been bought out by private equity. 
So it looks like the option to invest in irish reits won't be there for much longer as they all get privatised. The question is why were the stock markets not able to value them fully?


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## jpd (15 Apr 2022)

Or, put another way, why are private equity funds over-valuing them?

I presume it is the political risk as the financial numbers are there for everyone to see and evaluate


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## Gordon Gekko (15 Apr 2022)

A big factor is the fear of Scum Fein/IRA coming into power and hammering the REITs.


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## galway_blow_in (21 Apr 2022)

joe sod said:


> It's obvious that the private market see that reits are undervalued by the stock markets and are moving to take them private. Already green reit and now hibernian reit have been bought out by private equity.
> So it looks like the option to invest in irish reits won't be there for much longer as they all get privatised. The question is why were the stock markets not able to value them fully?



If you're thesis is correct,  that might lead one to believe that the residential REIT IRES is a good buy as it might get bought out like Hibernia did ?


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## galway_blow_in (21 Apr 2022)

Gordon Gekko said:


> A big factor is the fear of Scum Fein/IRA coming into power and hammering the REITs.



Surely SF would frighten private equity the very same?


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## jpd (22 Apr 2022)

Private Equity may take a longer view and realise that whatever SF do will eventually be reversed as the policies prove to be unworkable and full of nonsense - this could take a few years. After all, the Soviet Union lasted 70 years before collapsing


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## joe sod (22 Apr 2022)

jpd said:


> Private Equity may take a longer view and realise that whatever SF do will eventually be reversed as the policies prove to be unworkable and full of nonsense - this could take a few years. After all, the Soviet Union lasted 70 years before collapsing


Yes isn't that essentially the short comings of the stock markets.  Warren buffet said that in the short term the markets are a voting machine but in the long run they are a weighing machine. 
Sure look at the oil and commodities markets today they were ultra cheap for the last decade, the cheapest they have ever been.  Was the stock markets correct to value them only based on short term dynamics. At the same time though private equity wasn't racing to take these private either


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## theo67 (22 Apr 2022)

galway_blow_in said:


> I was very pleased to see Hibernia being bought out last Friday , I bought fairly heavily into it in February 2021
> 
> agree about REIT,s not tracking the on the ground property market , they do not , they are income vehicles , are they a better investment than direct property ?
> 
> I dont know , probably are for people who dont want hassle of property management


I made a small investment also,like a lot of people I began to dabble in shares during lockdown.Hope this isn't bordering on speculating about specific shares,but would an experienced investor cash out now at 1.62 in case the proposed buyout falls through? Or hang around for the proposed 1.64 in total when deal goes through.Not a lot of difference in my case due to number of shares held, so really just wondering what the big hitters do in such scenarios.


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## galway_blow_in (22 Apr 2022)

theo67 said:


> I made a small investment also,like a lot of people I began to dabble in shares during lockdown.Hope this isn't bordering on speculating about specific shares,but would an experienced investor cash out now at 1.62 in case the proposed buyout falls through? Or hang around for the proposed 1.64 in total when deal goes through.Not a lot of difference in my case due to number of shares held, so really just wondering what the big hitters do in such scenarios.



The 1.64 comprises 1.60 per share and a four cent dividend , I sold just below 1.63 two weeks ago


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## Gordon Gekko (22 Apr 2022)

jpd said:


> Private Equity may take a longer view and realise that whatever SF do will eventually be reversed as the policies prove to be unworkable and full of nonsense - this could take a few years. After all, the Soviet Union lasted 70 years before collapsing


Isn’t private equity usually more short-term in its thinking?


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## Daithi7 (2 May 2022)

REITs seem to me to be tailor made for a pension investment (as dividends won't be taxed, and they're a steady utility type of investment). Given the discount to NAV that many of them exhibit from time to time,  private equity will swoop on them if they drop below value thresholds.  And private equity   property funds investing into Ireland still enjoy huge tax advantages over private investors and retail REIT shareholders.  Hence you have a well funded Private Equity class of investor, who has tax advantages,  bidding to buy REITs from retail investors who don't enjoy these same advantages and hence will value the REITs at higher multiples.


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## galway_blow_in (2 May 2022)

Daithi7 said:


> REITs seem to me to be tailor made for a pension investment (as dividends won't be taxed, and they're a steady utility type of investment). Given the discount to NAV that many of them exhibit from time to time,  private equity will swoop on them if they drop below value thresholds.  And private equity   property funds investing into Ireland still enjoy huge tax advantages over private investors and retail REIT shareholders.  Hence you have a well funded Private Equity class of investor, who has tax advantages,  bidding to buy REITs from retail investors who don't enjoy these same advantages and hence will value the REITs at lower multiples.


So why did private equity not swoop on IRES two years ago when price was 40% lower ?


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## Daithi7 (2 May 2022)

galway_blow_in said:


> So why did private equity not swoop on IRES two years ago when price was 40% lower ?



That's a good question in some ways I suppose,  and i haven't been following the IRES Reit specifically tbh.. But it's the discount to NAV and potential future return on investment that they're (and any investor) is most interested in, so in that sense price is the wrong metric to be judging whether to invest or not. It's simply not any way the full part of the story.


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## galway_blow_in (2 May 2022)

REITs on the surface seem like a far superior option to straight property investing these days but unfortunately they have failed miserably to in anyway track the on the ground market , so much so that they are not any kind of benchmark at all in terms of how the irish property market moves

4% dividend yields can also be found in well known UK investment trusts and not only have you far better diversification , you are buying into highly liquid assets , the irish REIT,s have tiny trading volume daily


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## joe sod (3 May 2022)

galway_blow_in said:


> So why did private equity not swoop on IRES two years ago when price was 40% lower ?


I think ires is already partly private anyway  ,well not actually private but not fully traded as an independent entity, I think it's partly owned by cap reit a large Canadian reit company


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## jpd (3 May 2022)

That doesn't make it private


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## joe sod (3 May 2022)

But it's still owned by alot of investment management companies including capreit,  they obviously all see value in it and want to be invested .


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## Daithi7 (3 May 2022)

joe sod said:


> But it's still owned by alot of investment management companies including capreit,  they obviously all see value in it and want to be invested .



Do all of these shareholders enjoy extra tax advantages over retail investors? I.e. do they need to pay any tax on dividends??


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## jpd (3 May 2022)

A lot of them would be pension funds, life funds and ARF assets managed by the investment companies - for example Irish Life

Pension funds obviously have tax adavantages ...

This would not be a lot different than the shareholders in most large quoted companies where the majority of the shares are held by pensions funds, etc etc
Individual shareholders are only a small proportion of shareholders in any major company these days

I think also, that if you hold your shares in nominee form ie through a broker, that your holding is shown as being held by the broker's custodian ie probably one of the investment companies listed


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## galway_blow_in (3 May 2022)

joe sod said:


> I think ires is already partly private anyway  ,well not actually private but not fully traded as an independent entity, I think it's partly owned by cap reit a large Canadian reit company


is that not like saying Berkshire Hathaway have a large stake in say Wells Fargo or Coca Cola ?

is that Canadian REIT not publicly traded in Canada on their stock exchange  ? , Im pretty sure it is


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## galway_blow_in (3 May 2022)

joe sod said:


> But it's still owned by alot of investment management companies including capreit,  they obviously all see value in it and want to be invested .


sure but it still doesnt change the fact that as an alleged substitute for owning property the traditional way , its not a  substitute at all , which isnt to say its not a reasonable investment , it is from an income generation standpoint but so are telecoms , the irish REITS act like utilities , they act nothing like the irish property market

the main Irish residential REIT pays a dividend currently of over 4% but so does a well known british investment trust and with the trust you get to own nearly a hundred British companies , far more diversification , I own the REIT im currently slating and done very well out of the commercial REIT which was recently bought by an american outfit but I bought both at a cheap price , anyone who bought even as recently as 2019 is down money, this despite the irish residential property market haven risen at least 20% in the past two years


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## jpd (4 May 2022)

REIT values are not linked to property prices except in a very general way.

Their share value is determined more by valuing of the dividend income using current interest rates or future expected interest rates. 

recent and prospective interest rate rises have reduced their valuation.

In the long run, property prices do matter, as if property prices rise, then rents will rise as well, with a time lag, as the property markets realign owners and renters


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## joe sod (4 May 2022)

jpd said:


> recent and prospective interest rate rises have reduced their valuation.


But isn't that the same for every investment including direct property investment  ,interest rate rises will affect valuations maybe not immediately given that property is not traded on the market every second of the day like stocks are


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## joe sod (21 May 2022)

jpd said:


> Or, put another way, why are private equity funds over-valuing them?
> 
> I presume it is the political risk as the financial numbers are there for everyone to see and evaluate


Is this not just a matter of opinion though, the fact is that hibernia and green reits were undervalued by the public markets and taken back private again. We will only ever find out if they were overvalued if the private purchaser puts them back on the market in the future at a loss, I very much doubt that is going to happen.


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## galway_blow_in (13 Jun 2022)

They move inversely to the bond Market and as the can be seen with the sole remaining Irish residential REIT  ,are not in a good place right now, investors won't buy a REIT paying 4% when they can get 3% on a bond


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## jpd (13 Jun 2022)

Mind you, if the price drops further, then the yield will go up - no sign of rents dropping just yet


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## galway_blow_in (14 Jun 2022)

jpd said:


> Mind you, if the price drops further, then the yield will go up - no sign of rents dropping just yet


REITS  are no reflection of the real property market no matter how they are marketed

Buy them for solid income but not as any substitute for property investment


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## joe sod (14 Jun 2022)

galway_blow_in said:


> They move inversely to the bond Market and as the can be seen with the sole remaining Irish residential REIT  ,are not in a good place right now, investors won't buy a REIT paying 4% when they can get 3% on a bond


Yes but bond prices also move inversely to interest rates, as interest rates rise the bond purchased last year falls in price to match the new yield on new bonds.
Bonds were great investments for last 40 years but not now  ,every dog has its day


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## galway_blow_in (14 Jun 2022)

joe sod said:


> Yes but bond prices also move inversely to interest rates, as interest rates rise the bond purchased last year falls in price to match the new yield on new bonds.
> Bonds were great investments for last 40 years but not now  ,every dog has its day


That's beside the point and the fact remains that the likes of REITS and utilities fall out of favour as the coupon on a bond rises as one is seen as much less riskier than the other


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## jpd (14 Jun 2022)

Also most REITs will use loan/bond financing as well as equity, so higher interest costs will reduce the yield in the future as the loans are rolled over at a higher rate


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## joe sod (15 Jun 2022)

jpd said:


> Also most REITs will use loan/bond financing as well as equity, so higher interest costs will reduce the yield in the future as the loans are rolled over at a higher rate


But that's the same for most equities  not just reits, the cost of financing goes up with higher interest rates that's why the stock markets in general are down but especially the growth stocks. 
I take the point though about reits not being great at following the property market but that's the Irish political risk priced in. Michael d Higgins contributed to that again yesterday


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## galway_blow_in (15 Jun 2022)

joe sod said:


> But that's the same for most equities  not just reits, the cost of financing goes up with higher interest rates that's why the stock markets in general are down but especially the growth stocks.
> I take the point though about reits not being great at following the property market but that's the Irish political risk priced in. Michael d Higgins contributed to that again yesterday


Do REITS track the market accurately in any country?


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## jpd (15 Jun 2022)

Over the long term, yes - otherwise they would be broken up and the properties sold off


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