Real Estate Investment Trusts providing property growth

12 May 2022

Real Estate Investment Trusts (REITs) that own and develop purpose-built assets can provide investors with attractive returns as the real estate sector adjusts to tenant demand post pandemic, according to Gravis Advisory.

As REITs must distribute the vast majority of the rental income they generate from full properties with long-term, committed and solvent tenants is a bonus for investors, particularly those who choose to reinvest their dividends, the group said.

During March, the UK Real Estate Index increased by 11.60% and the Global Real Estate Index rose by 9.14% despite a host of headwinds including the pandemic, rising inflation and the Ukraine war.

Matthew Norris, investment adviser at Gravis Advisory, said: “As UK REITs are required to distribute 90% of rental profits, over the past decade, reinvesting this income has created a significant compounding benefit for investors.

“While the appreciation in UK real estate share prices has delivered a 5.82% annualised return, the power of compounding income increases investor returns to 8.96% and surpasses the 6.81% compound annual total returns generated by the broader UK stock market. This is clear evidence that investing in the right REITs, those that own and develop purpose-built assets, can provide investors with ‘growth income’ and not ‘fixed income’.”

Unite Group, the largest listed owner and operator of purpose-built student accommodation in the UK, announced a 70% increase in its full year dividend. Meanwhile, Mountview Estates, the owners of a portfolio of regulated tenancy residential property, paid two dividends in March.

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