One of the problems of investing in buy-to-let property for me is I don’t have enough capital to create a diversified portfolio of assets. So I’d rather invest in the shares of a property Real Estate Investment Trust (REIT) such as Regional REIT (LSE: RGL), which has a prospective dividend yield around 8% for 2019.
The trust launched at the end of 2015 and is managed by London & Scottish Property Investment Management, the Asset Manager, and Toscafund Asset Management, the Investment Manager. I like that kind of set-up when it comes to asset management because it suggests a team of experienced professionals are running the show.
A diversified and growing portfolio
Regional REIT is focused on income-producing assets in the UK, such as offices and industrial units. It looks like the firm got its name because it invests outside the orbit of the M25 motorway, in “the regional centres.” In today’s half-year results report, the company revealed it has a portfolio of 149 properties, which support 1,178 units and some 828 tenants.
To achieve that kind of diversification with buy-to-let I’d have to be very, very successful, yet I can own a slice of the benefits flowing from Regional’s roughly £722m portfolio by buying some of the company’s shares. It’s a no-brainer for me.
Why would I want to embroil myself in all the inconvenience and expense of running a buy-to-let business when property shares such as this one will potentially give me the same benefits – capital appreciation and income? And the investment is passive in the sense that all I need to do is follow the news from the company and buy, hold and sell my shares accordingly.
And I find today’s news encouraging. In the first six months of 2019, Regional REIT delivered operating profit up 17% on the equivalent period last year, with rental income and adjusted earnings per share broadly unchanged. The directors declared a 2.7% increase in the interim dividend and aim to pay total dividends for 2019 of 8.25p. That puts the anticipated dividend yield at just under 8% for the current year with the current share price close to 104p, and next year’s dividend is set to rise higher still.
Intensive portfolio management
One of the things we tend to get with REITs is active portfolio management. And there’s a list in today’s report describing the property purchases, disposals and investments the company has made in the period. I think such activity has the potential to enhance returns for shareholders and is another great attraction for me when it comes to holding shares in REITS.
Chief executive of the asset manager London & Scottish Property Investment Management Limited, Stephen Inglis, described in the report how the period had been a “a very active and successful” one. The firm is working on strengthening the composition of the portfolio “to take advantage of the considerable and growing opportunities that we are seeing in our markets.” He described the firm’s approach to asset management as “intensive” and aimed at maintaining “sector leading” returns for shareholders.
With the price-to-book value around one and the high dividend yield, I’m inclined to put faith in the company and pick up a few of the shares.