Money grows on trees not in commercial property'. This is one of the best headlines I've seen recently, or as the DJ Chris Evans would say, ‘a top tenuous link to property'.
Apparently, according to the Investment Property Databank (IPD), ‘the world-leader in commercial real estate performance analysis services’, results for its UK Forestry Index showed that an investment in forestry would have far outperformed all asset classes in 2007. In the 12 months to December 2007, forestry in the UK returned 31.6%, far in excess of returns from equities, bonds and commercial property which during the same period earned investors 5.3%, 6.4%, and -3.4% respectively.
Maybe I was just too focussed on extolling the virtues of REITs to anyone who would listen, but the funny thing is that I don’t remember going to any property conferences in 2006 or 2007 where I was being told to put my money into trees.
Oh well hindsight and indices are both great things, I’ll just go back to my favourite topic – pub REITs. Having pooh-poohed Mays euphoria about Enterprise Inns, I’m now considering the prospects more clearly.
On the face of it, Punch Taverns announcement at the end of June that they had agreed a way with HMRC to both convert to REIT status and to continue to own Spirit Taverns, their managed estate business, strikes me as pretty important; as it appears to allow a REIT to own and derive significant income from a operating business. This is something that has previously been a major stumbling block for many prospective REITs in the pub sector and beyond. The devil will be in the detail but I’ve been surprised at how muted the reaction has been. Maybe it’s all built into the price or maybe I’m just an optimist.
Anyway, mine’s a pint of whatever their advisers were drinking. When REITs were first launched, there was lots of talk about specialist vehicles and I guess pub REITs are a good example of their development. But those with more sophisticated palates might prefer to investigate Vintage Wine Trust (www.vintagewinetrust.com ) - the world’s only wine REIT, based in California – where else? It all looks very smart, though their pitch about outsourcing vineyards worries me a bit. Of course nothing beats on-the-spot research in the property industry and I’m told that at least one fund manager has felt the need to organise a ‘global team meeting’ there to make sure they were a sound investment opportunity!
And finally, even more news that the mythical wall of money is still out there. Allegedly last week, almost $20bn of real estate funds were due to be launched; a sign apparently that ‘equity raising for property investment shows no sign of slowing, in spite of apparent difficulties in global property markets’. Well I just wish some of it would be spent instead of sitting around in press releases - but then maybe the rates available for cash are more attractive than the risks of buying into real estate right now!
Dave Butler is head of external affairs, Reita
The views expressed are those of the individual.
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