richfool wrote:I can't say I see any upside to property REIT's until interest rates have reached the top and rate cuts are visible.
I hold two REITs and admit I am conflicted about what to do. We know that interest rates increasing will reduce the EPRA NAV because the discount rate used in the DCF calculation used for determining NAV also rises. However, in a more normal world, the Tangible NAV of a company is calculated by the amount it could raise if it were to stop trading, sell off all its assets, pay off the debt, and return what is left to shareholders. I can't help feeling that there is a mismatch here i.e. just because the DCF calculated NAV is lower, it doesn't mean that a real-world property transaction would take place at that price, and in all likelihood it would take place at a higher price.
Not saying I have any answers, but REITs are a trivially small amount of my portfolio, so happy to hold what I have for now on the basis that "real" NAVs are much higher.
All the best, Si