Here are the main to examine with attention if you want to invest in a REIT (Company Collective Investment in real Estate).
An investment in shares of REITS (real Estate Investment trusts) has more than one advantage : it is more stable than a stock investment offers an attractive yield and distributes income on a regular basis. If you are convinced, remains to select the REITS that meet your wealth objectives. Here are a few ideas to help you make your selection.
1. PCSI office or of trade ?
Traditionally, the PCSI performance invest in offices or in the walls of commerce. Some mix the two types of assets, and to diversify more (hotels, warehouses,…).
Those who buy offices choose to invest in a heritage located at the locations so-called “premium”, either to prioritize the districts side.
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In the first case, the offices are located at the most prestigious addresses of a large town. These REITS are designed to provide more security to their unitholders, since even in the event of a crisis, their offices will continue to rent with a low haircut. Disadvantage : as they are expensive, the profitability offered is lesser.
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The REIC who prefer square metres less central to adopt a different strategy. Focusing on offices located in the business districts in first or second crown of very large city (Paris, Lyon, Toulouse,…), they present a tenant’s risk slightly higher. In fact, in the case of a crisis these square meters will find it more difficult to rent. On the other hand, as the purchase price is lower, the cost-effectiveness of their units is also higher.
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The issue is different for the walls of trade : provided that the location is good (shopping street in the heart of the city, the location premium in a commercial gallery high-end,…), it will be rented without difficulty at a high price. At this time, it is better to choose the shops at the foot of buildings, rather than the great centres, bringing together a multitude of small signs in the periphery. Be careful, these last had their hour of glory in the mid-1990s, the SCPI-old can have in their estate.
2. Capital open or closed ?
The SCPI have two forms on different legal. Some are said to be “open”, investors can buy and sell shares at any time (except in the case of a major crisis). The most numerous, are said to be “closed” : their shares are negotiable in the secondary market. If you want to buy, it is necessary, therefore, to wait for another investor to sell (and vice versa if you want to sell), or you have to wait for an increase in capital (at period given for periods fixed in advance) to acquire.
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Difficult to tell what type of REITS focus on, because more than the legal form, it is the quality of the manager that counts. The only notable point is that, a priori, a REIT with variable capital is more liquid, since its units are marketable more easily, provided that the number of buyers and sellers is balanced. Because if all the carriers want, for example, sell at the same time, the SCPI will have to liquidate a part of its heritage for the refund, which may take up to six months. In contrast, shares of REITS to fixed capital are slightly less liquid, since tradable only on the secondary market. Their value can, therefore, be disconnected from that of the real estate, as they are traded with a discount if the bid is higher than the request and with a surcharge in the opposite case.
3. What financial indicators should be given priority ?
in Addition to the quality of the housing stock, the financial criteria should refer your choice. Thus, the internal rate of return (IRR), presented in the reference documents, gives an idea of the overall performance of the REIT. It is calculated by taking into account the income paid to investors and the revaluation of the price of the share over the period.
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It should not be confused with the net return of the price of the units, which corresponds to the ratio between the net dividend paid a year and the purchase price of the share in the same year. The net yield gives an indication of how much will the units over a long period, without taking account of the more or less potential value to the output.
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Another important factor to consider : the amount of the carry forward. This is the part of the rent not distributed that the company is in reserve to cope in the event of a hard blow. If it is equivalent to two to three months of rents, the REIT will continue to distribute the same dividend, even if it has a bad year.
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Finally, the last important indicator is the reserves for claims. If it is very low, the SCPI will be difficult to prevent failure, important rental. If it is too strong, it means that the REIT expects that many tenants have problems, which is rather a sign of bad management.
