We are live blogging from EG's 7th annual London development summit so this post is prone to inaccuracy, omissions and typos
Neil Thompson, Development Director, Great Portland Estates
What is the current appetite for REITS?
REIT sector overview
How important is it? Well not really compared to other sectors such as Oil & Gas. BP market capitalisation has halved but it is still way higher than real estates sector
Has the REIT regime achieved its objectives
Tax transparency: yes
Wider participation: not really
Stable income for participants: difficult to tell
Residential property investment: just hasn't happend
Remove discount to NAV: the discount hasn't been removed
Is there a place for smaller REITS?
Five companies dominate 69% of property sector. Smaller REIT's have performed, comparatively, slightly better than larger REITS. GPE Derwent London and Shaftsbury all bottomed out on shallower curves and all London-centric in their focus.
Neil Thompson, Development Director, Great Portland Estates
What is the current appetite for REITS?
REIT sector overview
How important is it? Well not really compared to other sectors such as Oil & Gas. BP market capitalisation has halved but it is still way higher than real estates sector
Has the REIT regime achieved its objectives
Tax transparency: yes
Wider participation: not really
Stable income for participants: difficult to tell
Residential property investment: just hasn't happend
Remove discount to NAV: the discount hasn't been removed
Is there a place for smaller REITS?
Five companies dominate 69% of property sector. Smaller REIT's have performed, comparatively, slightly better than larger REITS. GPE Derwent London and Shaftsbury all bottomed out on shallower curves and all London-centric in their focus.
Broker recommendations are slightly better for London-focused smaller REITs. Why?
Strategy is key. Major REITS tend to perform together, act as default for investors because shares are liquid and act as economic baromoter rather than prue property plays.
With smaller REITS individual transactions have impact - 'move the needle'. For example GPE bought a building on Regents Street last year and based on projected rental growth, anticipatred potential for profit to increase to 5.5% of GPE NAV. For larger companies profit increase would have to be much larger to get the same NAV growth.
Investors prefer sector focused REITS, why?
It allows them to choose where they invest, sectorially and geographically. All three small London REITs are currently trading better than the three large ones.
Liberty: overwhelming shareholders voted for demerger
What have REITS been doing
Re-capitalisation (13 out of the 19 have raised money). New equity that's been raised has mainly been done for balance sheet repair rather than for new projects. GPE raised £175m in May 2009 but by March 2010 we'd committed majority of that money and those buildings have increased in value by 24%.
See you all after the lunch break for more live commentary from the event
More London development summit posts:
Debt financing
JLL's Bill Page predicts a quiet summer (EG TV interview)
What's influencing occupiers
Liz Peace talks Prospects for the capital markets
Richard Blakeway talks the political landscape
Stories on EGi
Peace attacks massive burden of infrastructure costs
Blakeway outlines plans for HCA board (EGTV interview)
JLL's Bill Page warns of a quiet summer for London agents (EGTV interview)
Strategy is key. Major REITS tend to perform together, act as default for investors because shares are liquid and act as economic baromoter rather than prue property plays.
With smaller REITS individual transactions have impact - 'move the needle'. For example GPE bought a building on Regents Street last year and based on projected rental growth, anticipatred potential for profit to increase to 5.5% of GPE NAV. For larger companies profit increase would have to be much larger to get the same NAV growth.
Investors prefer sector focused REITS, why?
It allows them to choose where they invest, sectorially and geographically. All three small London REITs are currently trading better than the three large ones.
Liberty: overwhelming shareholders voted for demerger
What have REITS been doing
Re-capitalisation (13 out of the 19 have raised money). New equity that's been raised has mainly been done for balance sheet repair rather than for new projects. GPE raised £175m in May 2009 but by March 2010 we'd committed majority of that money and those buildings have increased in value by 24%.
See you all after the lunch break for more live commentary from the event
More London development summit posts:
Debt financing
JLL's Bill Page predicts a quiet summer (EG TV interview)
What's influencing occupiers
Liz Peace talks Prospects for the capital markets
Richard Blakeway talks the political landscape
Stories on EGi
Peace attacks massive burden of infrastructure costs
Blakeway outlines plans for HCA board (EGTV interview)
JLL's Bill Page warns of a quiet summer for London agents (EGTV interview)
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