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Summary
- Real estate investment trusts (REITs) serve as a popular investment option for income-oriented investors.
- REITs are obligated to pay up to 90 per cent of their earnings to their shareholders; investors can be assured of a higher income ratio.
- These are designed to be tax-efficient, which means that when REIT receives profits and distributes them to its shareholders, it will be treated as a pass-through flow and not be taxed.
Real estate investment trusts (REITs) serve as a popular investment option for income-oriented investors. These stocks provide investors with exposure to the real estate market without having to maintain and upkeep assets that usually are handled by landlords.
REIT stocks offer consistent revenue and earnings that provide stable dividend yields; as REITs are obligated to payout up to 90 per cent of their earnings to their shareholders, investors can be assured of a higher income ratio.
REITs are designed to be tax-efficient, which means that when REIT receives rentals and distributes them to their shareholders, it will be treated as a pass-through flow and not be taxed. Additionally, as REITs are typically secured by long-term leases, there is limited risk to the investor. The long-term lease ensures that the income flow to the REIT will continue in a predictable manner.
Reopening of the economy post lifting of COVID-19 restrictions is expected to drive demand for residential, commercial and industrial properties, reflective in earnings of many REITs. Here are the top 10 FTSE listed REITs selected based on their market capitalisation.
1. SEGRO Plc (LON: SGRO)
FTSE 100 listed SEGRO is a Real Estate Investment Trust in the UK. It is engaged in managing and developing modern warehouses and industrial property. It currently owns or manages 8.8 million sq m of industrial space worth £15.3 billion. On 16 July 2021, SEGRO entered into an agreement with AXA IM Alts to sell six urban warehouses with floor space of 56,000 sq m in Italy for €127.5 million.
SEGRO registered a pre-tax profit of £168 million in H1 2021 (period ended 30 June 2021), up by 19 per cent compared to £141 million in H1 2020. High occupier demand resulted in £38 million worth of new headline rent commitments for the company during H1 2021.
SEGRO’s market cap stands at £14,943.13 million as of 11 August, and its year-to-date return is 31.67 per cent.
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2. Land Securities Group Plc (LON: LAND)
Land Securities Group is a real estate company with a £10.8 billion portfolio of leisure, retail, residential, and workspace hubs.
Land Securities announced the first quarterly dividend payout for the financial year 2021/22 at 7.0 pence per ordinary share payable 8 October 2021. As of 7 July 2021 (on the 10th day of rent collection), 81 per cent of the total rent due on 24 June was paid.
Land Securities Group’s market cap stands at £5,283.76 million as of 11 August, and its one-year return is 21.87 per cent.
3. Unite Group Plc (LON:UTG)
Unite Group is a property investment firm that develops and manages student accommodation in the UK. Unite Group’s European Public Real Estate Association (EPRA) earnings for the half-year ended on 30 June 2021 rose by 18 per cent to £88.3 million compared to £74.8 million in H1 2020.
On 27 July 2021, Unite Group announced an interim dividend of 6.5 pence for H1 2021.
Unite Group’s market cap stands at £4,769.93 million as of 11 August, and its one-year return is 27.96 per cent.
4. British Land Company Plc (LON: BLND)
British Land Company is a leading property development and investment firm in the United Kingdom. It is a constituent of the FTSE 100 Index and became a real estate investment trust in January 2007.
In its quarterly update announced on 13 July 2021, the company registered 85 per cent of June 2021 rent collected, including offices 99 per cent, retail 71 per cent, and the retail collection was 24 ppt ahead of rent collected in the December quarter. In addition, the lifting of lockdown restrictions resulted in a notable improvement in the company’s business activity across retail parks with footfall and sales close to pre-pandemic levels.
British Land Company’s market cap stands at £4,798.62 million as of 11 August, and its one-year return is 40.58 per cent.
5. Derwent London Plc (LON: DLN)
FTSE 250 listed Derwent London is a London-based property investment and development company. On 10 August 2021, Derwent London announced the acquisition of two west end properties spread across an area of 182,100 sq ft for £214.6 million and a new joint venture (50:50) with Lazari Investments.
For six months ended 30 June 2021, Derwent London had let 139,000 sq ft for £7.7 million. It registered a total return of 2.7 per cent, up from -0.1 per cent in H1 2020 and -1.8 per cent in FY 2020.
Derwent London’s market cap stands at £4,231.20 million as of 11 August, and its one-year return is 25.51 per cent.
6. Tritax Big Box REIT Plc (LON:BBOX)
Tritax Big Box REIT plc is focused on investing in logistics facilities in the UK. Tritax Big Box REIT registered an operating profit of £84.1 million for H1 2021 ended 30 June 2021, up by 19.1 per cent compared to £70.6 million in H1 2020.
Tritax Big Box REIT announced an interim dividend payout for 1 April 2021 to 30 June 2021 period of 1.6 pence per ordinary share to be paid on 23 August 2021.
Tritax Big Box Reit’s market cap stands at £3,782.15 million as of 11 August, and its one-year return is 38.72 per cent.
7. Big Yellow Group Plc (LON: BYG)
FTSE 250 listed Big Yellow Group is a UK-based self-storage company offering secure and modern storage solutions for residential and commercial sectors. The company was converted into REIT in 2007.
For the Q1 2021 period (ended on 30 June 2021), the company’s closing occupancy rose by 14.6 per cent to 4,490,000 sq ft from 3,919,000 sq ft for Q1 2020. Its like-for-like store revenue grew to £35.4 million for Q1 2021, up by 13.8 per cent compared to £31.1 million Q1 2020.
Big Yellow Group’s market cap stands at £2,735.20 million as of 11 August, and its one-year return is 47.32 per cent.
8. Shaftesbury Plc (LON: SHB)
FTSE 250 listed Shaftesbury is a REIT that focuses on investments in London's West End area. For H1 2021 period (ended on 31 March 2021), Shaftesbury’s recorded 94 commercial and 144 residential leasing transactions spread across an area of 211,000 sq ft, with a rent value of £14.0 million (H1 2020: £15.0 million and H2 2020: £8.6 million). The company’s net property income decreased by 42.6 per cent to £26.5 million in H1 2021 compared to £46.2 million for H1 2020 due to reduced rent collections and increased vacancy rates.
Shaftesbury’s market cap stands at £2,384.05 million as of 11 August, and its one-year return is 17.49 per cent.
9. Londonmetric Property Plc (LON:LMP)
LondonMetric Property is a constituent of the FTSE 250 Index and the owner and operator of logistics platforms in the UK. On 7 July 2021, LondonMetric exchanged 15-year lease contracts on two new lettings spread across a total area of 260,000 sq ft. On 9 August 2021, LondonMetric sold its retail park in Leeds for £25.2 million.
For the year ended 31 March 2021, the net rental income of LondonMetric increased by 6 per cent to £123.3 million. The company fixed the Q4 interim dividend at 2.35 pence per ordinary share payable 13 July 2021.
Londonmetric Property’s market cap stands at £2,306.71 million as of 11 August, and its year-to-date return is 10.92 per cent.
- Safestore Holdings Plc (LON: SAFE)
Safestore Holdings is one of the UK’s leading self-storage companies that owns over 134 stores in the UK and Paris. Safestore Holdings recorded revenue of £88.1 million for six months ended 30 April 2021, an increase of 11.1 per cent compared to £79.3 million for the same period in 2020. Its EBITDA increased by 18.5 per cent to £54.4 million for the half year ended 30 April 2021, compared to £45.9 million for the period in 2020. The Group’s closing occupancy as of 30 April 2021 was 5.635 million sq ft, up by 16.8 per cent compared to the previous year.
Safestore Holdings’ market cap stands at £2,266.35 million as of 11 August, and its one-year return is 40.23 per cent.