Real estate investment trusts are a good asset, says analyst

Wed, 16 May 2007

Despite a sluggish start for real estate investment trusts (Reits) in the UK, they will be a good asset to have in the future.

This is according to Meera Patel, a senior analyst at asset management firm Hargreaves Lansdown.

Ms Patel said that while Britons have been reluctant to buy into this new form of investment, the future for Reits is looking bright.

"The whole idea behind Reits is great," she said. "The companies who have converted get benefits – but also because they have to distribute their majority of their income as dividends to investors ."

However, most of these companies are offering a really low yield, according to Ms Patel, meaning that they are not the most attractive investment options.

But this is only a temporary situation, Ms Patel believes. She predicted that with five-yearly rent reviews, which are usually only upwards, capital is likely to stabilise.

"Over time I would expect yields to rise because of upwards-only rent reviews and the fact that Reits have to distribute most of their income out as dividends to investors," Ms Patel concluded.

January this year saw the first firms able to convert to Reit status, with property investment companies including Land Securities and British Land converting since.

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