Flurry of property trust launches tempt income investors with 5% plus yields

The launch of a new UK real estate investment trust (REIT) - Warehouse REIT - is the latest in a flurry of property-focused launches in 2017.

In total, seven REITs have been launched and each has offered investors a juicy dividend yield, of 5% plus.

Warehouse REIT plans to raise £150 million to invest in a diversified portfolio of UK warehouse assets located in urban areas. It is going to target a dividend yield of 5.5%, and an annual total return of at least 10%.

This year has seen a number of new REIT launches as investors continue to hunt for income. According to analyst Winterflood, demand for specialist property vehicles remains strong.

Five alternative investments for 5%-plus yields

Emma Bird, research analyst at Winterflood, says: "The large number of REIT launches this year is likely to be a result of investors' continued demand for yield in the current low interest rate environment - all seven REITs that have been launched so far this year are targeting a yield of at least 5% on their issue price, once fully invested.

"In addition, the underlying assets into which these funds are investing typically have a low correlation to equity markets and the associated leases often have an element of inflation-linkage."

Other REIT launches in 2017

Residential Secure Income raised £180 million to invest in UK social housing. It is targeting an inflation‐linked dividend yield of 5% and total returns in excess of 8%.

Further, Triple Point Social Housing REIT was backed to the tune of £200 million to invest in UK social housing assets; it targets a quarterly dividend of 5%.

Another specialist property trust, Supermarket Income REIT, received £100 million to invest in a diversified portfolio of supermarket real estate assets in the UK. It targets a dividend yield of 5.5% and a net total return between 7-10%.

Another large fundraising in July (£110 million) was for Empiric Student Property. In addition, GCP Student Living raised £70 million and revealed that demand had "substantially exceeded" its fundraising target.

This was also true for GCP Infrastructure, which collected £70 million from investors, at a 13% premium to net asset value (NAV).

According to the Association of Investment Companies (AIC), the first half of 2017 saw 10 investment company IPOs - a big increase year-on-year, given that only one investment trust launched in the first six months of 2016.

Ian Sayers, chief executive of the AIC, adds: "It's interesting to note that much of the issuance, both new and secondary, took place in high-yielding, alternative asset classes such as debt, property and infrastructure.

"This reflects the suitability of the closed-ended structure for investing in these types of illiquid assets and continued investor demand for income."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.