Thursday, Feb 19, 2009
I hope none of you invested in REITS!!
FT/Yahoo: Property groups in £3bn call on shareholders
One of Nulabour first reckless throws of the dice to try and prop up property prices was to invent "Real Estate Investment Trusts" by which small savers would be conned into putting their hard-earned into commercial property. They went live in early 2007. They were quite highly geared - so for every 10% fall in commercial property means a 25% fall in the value of your REITS shares. Land Securities shares, for example, are down 75% since the beginning of 2007. So the insiders bailed out at the top leaving Nulabour & TOry core voters, the small savers, nursing huge losses. Not that I'm a conspiracy theorist or anything. Remind me, who votes for these people?
Posted by mark wadsworth @ 10:27 AM (435 views) Add Comment
4 Comments
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1. 51ck-6-51x said...
Looks like bellwether had the right idea yesterday (post 101)
2. mountain goat said...
I do feel for the small investors. I even half-heartedly looked into these REITS for a bit after reading investment advice that as part of a diversified portfolio you should have something invested in property. I remember REITS were touted in the investment section of weekend newspapers as the next big winner, just like investors in the USA and Australia had enjoyed.
3. bellwether said...
It's certainly a hunch 51ck-6-51x, although I'm doing more research as don't want to find the bad news is priced in. The critical aspect are rents. During the boom rental income came no where close to justifying share/asset price which was all bubble based on inflated capital value, there has been a severe correction to this and as initial assesment it looks as if things are now sanely priced (tho not rock bottom value) if we could assume rental income were to remains stable. Thing is rental income may be far less stable than everyone is assuming and I'm not sure what level of tolerance is built into current values. To truly nail it would need to research a number of companies to find the biggest discrepancy between value and market value but the level of research to do this is way beyond one person. So it will be a sector play if I can get comfortable on it.
4. mark wadsworth said...
Bellwether, it was reported recently* that capital values rose and fell by 35% in seven years, but rental values only went up 13% and down 2%. I find the 2% rather surprisingly low, but it won't be a bloodbath, apparently.
* Telegraph article, if you can be bothered.
http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/4438275/The-bad-news-is-that-the-IPD-commerical-property-index-doesnt-show-all-the-bad-news.html