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British Land Finals.

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Lootman
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Re: British Land Finals.

#222048

Postby Lootman » May 16th, 2019, 11:10 am

MDW1954 wrote:as SalvorHardin points out, most REITs aren't ITs as we understand them, because they hold assets directly (individual warehouses, shopping centres, or office blocks), and not the shares of property companies, as, say, TR Property does.

Within the HYP context, REITs are fine. TR Property-type ITs are another matter.

The simplest way to differentiate them surely is by their very different tax treatment?

I'm not aware that it is the tax treatment that drives the logic of allowing one but not the other in HYPs, but it's certainly a simple way of determining which is which.

REITs are best held in tax-sheltered accounts, in my view, due to the ability to reclaim the tax on the dividends.

Arborbridge
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Re: British Land Finals.

#222049

Postby Arborbridge » May 16th, 2019, 11:10 am

SalvorHardin wrote:Don't think of REITs as being investment trusts; classify them as property companies. For example, British Land's assets are not dominated by a portfolio of property company shares and bonds, which is what we'd expect to see if it was an investment trust. Instead British Land owns, builds, develops and trades its own properties.

Unfortunately when REITs were created in the 2006 Finance Act, they used the American term. But in American English "Investment Trust" has a completely different meaning to that in British English.

An example of what I would call an property investment trust is TR Property, which holds about 90% of its assets in the shares of property companies (and REITs).

If Morningstar chooses to classify some REITs as investment trusts, that's their lookout. As the old riddle says: "How many legs does a dog have if you call his tail a leg? Four. Saying that a tail is a leg doesn't make it a leg"


That is precisely why BLND is in my HYP, not my IT basket, and it's also why it is not classed as an IT by either AIC or Morningstar - so they have it correct in that case.

I think we more or less agree on the test, and I believe AIC and Morningstar may have it right, but in any case, it's not a big issue.

Arb.

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Re: British Land Finals.

#222057

Postby Arborbridge » May 16th, 2019, 11:18 am

MDW1954 wrote:
REITs (Real Estate Investment Trusts) are always going to be listed by the AIC if their boards choose to join the AIC.

That said, as SalvorHardin points out, most REITs aren't ITs as we understand them, because they hold assets directly (individual warehouses, shopping centres, or office blocks), and not the shares of property companies, as, say, TR Property does.


MDW1954


I've no doubt AIC applies some sort of test whether companies can join or not, otherwise any company could be listed there. For example, 3IN is classed as an IT as I mentioned previously. I wonder if BLND and BBOX have to pay Morningstar or can choose to go into one category or another? - for someone somewhere has decided one is more like an IT than the other. And since I have to decide also, I might as well take some note of what AIC and Morningstar have done.

TBH, when I bought 3IN its yield was too low for my HYP, so it was quite convenient to put it in the IT basket.

Arb.

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Re: British Land Finals.

#222058

Postby MDW1954 » May 16th, 2019, 11:18 am

Lootman wrote:
MDW1954 wrote:as SalvorHardin points out, most REITs aren't ITs as we understand them, because they hold assets directly (individual warehouses, shopping centres, or office blocks), and not the shares of property companies, as, say, TR Property does.

Within the HYP context, REITs are fine. TR Property-type ITs are another matter.

The simplest way to differentiate them surely is by their very different tax treatment?

I'm not aware that it is the tax treatment that drives the logic of allowing one but not the other in HYPs, but it's certainly a simple way of determining which is which.

REITs are best held in tax-sheltered accounts, in my view, due to the ability to reclaim the tax on the dividends.


I think the point being made is that some pure REITs (with PIDs, etc) are also listed by the AIC. I don't know this for a fact, as I've not looked. But that I think is what is being said.

I agree with your point about tax-sheltered accounts.

MDW1954

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Re: British Land Finals.

#222065

Postby PinkDalek » May 16th, 2019, 11:33 am

Lootman wrote:REITs are best held in tax-sheltered accounts, in my view, due to the ability to reclaim the tax on the dividends.


I think you mean distributions (as in PIDS) but, other than cash flow, holding them unsheltered does not mean the Income Tax deducted is lost, as it can either be reclaimed or offset against Income Tax liabilities generally.

Noting, as per the OP, the final payable in August 2019 includes a Property Income Distribution of 3.875 pence and a Non-Property Income Distribution of 3.875 pence (despite both being described by British Land as dividends).

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Re: British Land Finals.

#222066

Postby Alaric » May 16th, 2019, 11:36 am

MDW1954 wrote:I think the point being made is that some pure REITs (with PIDs, etc) are also listed by the AIC. I don't know this for a fact, as I've not looked. But that I think is what is being said.



It would appear being listed by the AIC isn't a proxy for "Investment Trust". The AIC has several "property" classification sectors which contain some but not all REITs.

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Re: British Land Finals.

#222082

Postby Arborbridge » May 16th, 2019, 12:15 pm

Alaric wrote:
MDW1954 wrote:I think the point being made is that some pure REITs (with PIDs, etc) are also listed by the AIC. I don't know this for a fact, as I've not looked. But that I think is what is being said.



It would appear being listed by the AIC isn't a proxy for "Investment Trust". The AIC has several "property" classification sectors which contain some but not all REITs.


I suppose trawling through them (the property sector at AIC) would answer the question. I've just noticed that a company doesn't have to be a member of AIC to be listed - and example of this is ESP.

The companies I've clicked on so far have all been loosely investment vehicles rather than what we would regard as normal trading companies. But, I'm not intending to check them all at present!

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Re: British Land Finals.

#222087

Postby Alaric » May 16th, 2019, 12:25 pm

Arborbridge wrote:I suppose trawling through them (the property sector at AIC) would answer the question.


That's what I did. There is more than one sector. Many familiar and also less well known names are there, but not the one, SEGRO which I specifically searched for. Whilst still a REIT, that does behave as a developer as well as a property holder.

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Re: British Land Finals.

#222093

Postby Lootman » May 16th, 2019, 12:40 pm

Alaric wrote:
Arborbridge wrote:I suppose trawling through them (the property sector at AIC) would answer the question.

That's what I did. There is more than one sector. Many familiar and also less well known names are there, but not the one, SEGRO which I specifically searched for. Whilst still a REIT, that does behave as a developer as well as a property holder.

If the UK follows the US in its adoption of REITs, then there will be a trend towards non-property companies to list as REITs. As an example some lumber and mineral companies in the US have listed as REITs. There is a loose connection since both types of business hold large land banks for the purpose of their extraction of natural resources. But they are still not property companies in the sense that we would think of.

Whether this would be allowed by the rules as the UK has adopted them is another matter. But the benefits of being structured as a REIT are deemed sufficient that a conversion to REIT status is deemed to be shareholder-friendly and tax-friendly for a broader set of companies.

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Re: British Land Finals.

#222523

Postby funduffer » May 17th, 2019, 5:32 pm

This website is useful if you want to find out about UK REITs

https://www.bpf.org.uk/reits-and-property-companies

As lootman said, it is about tax treatment and income distribution that makes a REIT a REIT.


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