Flurry of property trust launches tempt income investors with 5% plus yields

The launch of a new UK real estate investment trust (REIT) – Warehouse REIT – is the latest in a flurry of property-focused launches in 2017.

In total seven REITs have been launched and each has offered investors a juicy dividend yield, of 5 per cent plus.

The latest launch – Warehouse REIT - plans to raise £150 million to invest in a diversified portfolio of UK warehouse assets located in urban areas. It is going to target a dividend yield of 5.5 per cent, and an annual total return of at least 10 per cent.

This year has seen a number of new REIT launches as investors continue to hunt for income. According to analyst Winterflood, demand for specialist property vehicles remains strong.

Emma Bird, research analyst at Winterflood, says: ‘The large number of REIT launches this year is likely to be a result of investors’ continued demand for yield in the current low interest rate environment – all seven REITs that have been launched so far this year are targeting a yield of at least 5 per cent on their issue price, once fully invested.’

She continues: ‘In addition, the underlying assets into which these funds are investing typically have a low correlation to equity markets and the associated leases often have an element of inflation-linkage.’

Other REIT launches in 2017

Residential Secure Income raised £180 million to invest in UK social housing. It is targeting an inflation‐linked dividend yield of 5 per cent and total returns in excess of 8 per cent.

Further Triple Point Social Housing REIT was backed to the tune of £200 million to invest in UK social housing assets; it targets a quarterly dividend of 5 per cent.

Another specialist property trust Supermarket Income REIT received £100m to invest in a diversified portfolio of supermarket real estate assets in the UK. It targets a dividend yield of 5.5 per cent and a net total return between 7-10 per cent.

Another largest fundraising in July (110 million) was for Empiric Student Property. In addition, GCP Student Living raised £70 million and revealed that demand had ‘substantially exceeded’ its fundraising target.

This was also true for GCP Infrastructure, which collected £70 million from investors, at a 13 per cent premium to net asset value (NAV).

According to the Association of Investment Companies the first half of 2017 saw 10 investment company IPOs, a big increase year-on-year, given that only one investment trust launched in the first six months of 2016.

Ian Sayers, chief executive of the Association of Investment Companies, adds: ‘It’s interesting to note that much of the issuance, both new and secondary, took place in high-yielding, alternative asset classes such as debt, property and infrastructure.  This reflects the suitability of the closed-ended structure for investing in these types of illiquid assets and continued investor demand for income. ‘ 

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