The UK's Shrinking REITs Sector Is Still Attracting Buyers
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Welcome to Merrin Talks Your Money, the personal finance edition of Merrin Talks Money. In these bonus podcasts, we talk about the best strategies for making the most of your money. I'm John Stevick, senior reporter for Bloomberg and author of the award-winning Money Distilled newsletter. Merrin's out today, but joining me in the studio very kindly is Jack Sidders, who is Bloomberg's team leader covering real estate and European investing. Jack, thanks very much for joining us today. Thanks very much for having me. So just to give you an idea of what we're going to cover, we're going to talk about what is a REIT, a Real Estate Investment Trust. We're going to run through an overview of what's been a hectic five years for the sector in which it's basically halved in terms of the number of REITs that are on the UK stock market.
And then we're going to talk about a particularly big deal that's going on in the REIT sector right now, where the biggest UK listed REIT is being targeted by a US peer. Jack's been on before and very kindly kind of talked to us about Real Estate Investment Trust. But just for listeners who are new to the show, perhaps, give a quick reminder of what is a Real Estate Investment Trust, Jack.
Yeah, sure thing. So, well, real estate investment trusts, or REITs as they're commonly known, are basically publicly traded landlords. The REIT regime came in just after the global financial crisis, just about 20 years ago. And the idea is that, so unlike a conventional listed landlord that can kind of do whatever it likes with the money it makes, a REIT distributes the vast majority of its earnings in the form of dividends to shareholders, So, mostly, it owns investment properties, properties that are rented out to companies that generate a rent, and it pays those rents out in the form of dividends to shareholders. But they'll also do, or most of them will do, a little bit of developments. They have a development portfolio as well, and that might be where they make their sort of development profits from building buildings, renting them out, and then selling them on.
Yeah, cool. So, yes, it's all about getting the rent in. and paying the dividends out and they get various tax kind of accommodations.
Exactly, yeah. The tax is key, I should have said. So, yeah, it's a sort of tax advantage structure so that you're not paying kind of double taxation. So they have some exceptions that other landlords don't benefit from.
Obviously, it's been an absolutely wild five years for most kind of investments. But obviously, things like COVID and the pandemic and working from home and the impact on office buildings and all the rest. Can you tell us through what's happened in the sector over the last five years? As I understand it, or certainly I've seen various statistics that say there were roughly 80 odd REITs in the UK listed about five years ago. And now that's going all the way down to about 40 or perhaps even slightly less. Can you talk us through why that's happened or how that's come about?
Yeah, of course. There's a lot to unpack there. If we start off just talking about real estate, commercial real estate very broadly, and then we can talk about the particular issues that have impacted the listed part of it and the REIT sector in particular.
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