Three real-estate investment trusts built on solid foundations
With interest rates set to remain at rock bottom, investors will come to prize reliable income streams, particularly those backed by physical assets, says professional investor Chris Clothier of the Capital Gearing Trust. Here. He picks three of his favourite Reits to buy now.

A consequence of the Covid-19 pandemic is that interest rates are going to be much lower for much longer. In the US the Federal Reserve has cut interest rates below 0.25%. The Fed Fund Futures market (where investors can speculate on the path of future interest rates) predicts that rates will turn negative before rising.
This is hardly surprising. The Taylor rule serves as a rule of thumb for central bankers: it takes unemployment and inflation as its inputs and spits out a target interest rate. Today it recommends an interest rate of minus 5%. It will be a long time before the US sees any interest-rate rises. The outlook is not very different here in the UK.
All this means that investors will be even more starved for income in the next few years and will come to prize reliable income streams highly, particularly those that are backed by either physical assets or government promises. Fortunately there are a number of investments in the property sector that meet these criteria: real estate investment trusts (Reits). Some of them are available at knockdown prices.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The backbone of online retailing
Tritax Big Box Reit (LSE: BBOX) invests in so-called mega-sheds: the large logistics warehouses that are the backbone of online retailing. The sheds themselves make up a fraction of the overall cost of distribution centres because inside they are kitted out with sophisticated “pick & pack” robotics. To protect this investment, tenants are happy to sign up for long leases, often rising with inflation.
The firm has signed a deal to pre-let 2.3 million square feet in Dartford to “a world- leading online retailer”, widely tipped to be Amazon. When completed this should add a few pence to the net asset value (NAV)per share. Rent collection has been strong – reflecting the thriving tenants – and the shares offer a covered 4.4% dividend yield. They trade around NAV.
Secure Income Reit (Aim: SIR) is managed by Nick Leslau and owns a portfolio of long-lease property assets. There are three parts to the portfolio: leisure, private hospitals and budget hotels. The shares have had a bruising year thanks partly to a spat between Travelodge and its landlords, which has just been resolved.
The leisure portfolio, which includes theme parks such as Alton Towers and Legoland, could also be a cause for concern. But Leslau says the tenants – which include the Lego family and Blackstone – are in it for the long haul and have deep pockets, while these irreplaceable assets are their crown jewels.
Healthy hospital holdings
The private hospitals look rock-solid and at present their rents are being paid by the government, which has commandeered all UK private hospitals to help fight the Covid-19 pandemic.
The shares trade at a 40% discount to historic NAV, which provides an ample cushion against any fall in the value of the leisure and budget hotel portfolio, and pay a dividend yield of 6.3%.
Finally, Residential Secure Income Reit (LSE: RESI) is a specialist residential-property investor. It owns a portfolio of retirement flats and shared-ownership properties. Both income streams look very secure and should rise slightly faster than inflation. It trades on a 15% discount to net assets and yields 5.5%.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Chris Clothier is co-manager of the Capital Gearing Trust.
-
8 of the best lakeside properties for sale
The best lakeside properties – from a house on the southeastern shore of Loch Lomond, to a 15th-century hall overlooking a lake in King’s Lynn, Norfolk
-
Gold’s allure and why you should never 'pay a premium for graded coins'
It is easy to become distracted by the beauty of gold, but remember why you buy it, says Dominic Frisby
-
Investment opportunities in the world of Coca-Cola
There is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?
Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
Trainline: a cheap cash machine for investors
Opinion Trainline’s shares have slumped owing to concerns about growth, but the sell-off seems overdone
-
Look to British stocks to lead the charge as the Magnificent Seven falter
Opinion Gervais Williams, fund manager, The Diverse Income Trust, picks three British stocks where he'd put his money
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throne
Greg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?
Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.