Choose carefully when buying real estate investment trusts

Some real estate investment trusts (Reits) are on hefty discounts to net asset value, but not all are bargains, says Max King.

Some real estate investment trusts (Reits) with safe income streams have sailed through the great virus crisis (GVC) almost unscathed – yet their share prices have fallen to significant discounts to historic net asset value (NAV). Among them are BMO Commercial Property Trust (LSE: BCPT) and Secure Income (Aim: SIR).

Launched in 2005, BCPT was one of the first to take advantage of a new tax regime exempting from taxation at the corporate level property companies that paid out at least 90% of their income to investors and thus qualified as Reits. BCPT sought to provide investors with an attractive yield and some potential for capital and income growth from investing in a diverse portfolio. At the end of 2019 it had assets of £1.37bn, financed by £310m of debt and over £1bn of equity. NAV per share was 140p, a fall of 9p on the year ,but the company continued to pay a monthly dividend of 0.5p per share.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.