REIT conversion is the flavor of the month at property firms |
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Tue, 02 Jan 2007 17:15
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LONDON - Property firms have started the New Year with a bang after converting to low-tax investment trusts that guarantee higher dividends.
Two major property firms, Land Securities and British Land saw their shares shoot up by almost one percent largely due to the fact that they, along with many other property firms, joined the newly created real estate investment trusts (REITs). Land Securities shares rose by 0.9 percent to 2,343 pence while rival British Land's shares shot up by 1.2 percent to 1,735p.
Around 10 listed property firms have agreed to join REITs, a trust fund that will pay very little or no tax. This is because most of their earning will be paid out to their shareholders as dividends. The list of firms joining REITs are British Land, Land Securities, Liberty International, Slough, Hammerson, Great Portland Estates and Brixton plus specialists Big Yellow, Workspace and Primary Health Properties.
Many believe that though REITs look as a great plan at the begining, investors should be very careful in going all out into these trusts.
Says Justin Urquhart Stewart, director of Seven Investment Management; "Investors need to be extremely careful about going into Reits at what looks like the top of the property market. Reits are starting to look like the current fashion fad and we all know what happens to fashion fads."
British commercial-property market is going through a boom time for the past couple of years. Last year the market beat all expectations to post returns close to 20 percent while in 2005 it had shown returns of 19.1 percent. However many believe that with rental yields minimized to as low as 4 percent, the boom could be off this year.
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