Thursday 20 May 2021

RDI REIT Goes Wrong (Portfolio Change)

In a recent article I looked at the potential of real estate - particularly Real Estate Investment Trusts (REITs) to generate income for the DIY Income Investor. However, in the article I did highlight the poor performance of my own holding in RDI REIT.

I've been dabbling in the RDI  for years - primarily because of the good yield and the seemingly attractive business model. It seemed like a good idea to have a stake in commercial and industrial real estate that paid a nice income. 

The final nail has been hammered into the coffin of my RDI REIT holding with the purchase - agreed by shareholders - by South African real estate investment trust Starwood (which already owned nearly 30% of the company). The price offered for the remaining shares was121.35p - a premium of one-third to the previous closing price and a similar premium to the six month average share price. It is, however, a nearly 20% discount to the company’s last reported EPRA NAV of 151.5p (on 31 August 2020).

I've been looking at property for a long time - since 2011, in fact. I bought SEGRO in 2012. I've been in and out of RDI REIT over the years, starting in 2014, since when a 1-for-5 share exchange has filleted the value, I've also looked at other REITs, like British Land, which I may have to revisit. 

Fortunately, I sold a load of RDI in 2019 at around my purchase price to fund another buy, so I was not too exposed. Still, my loss on this is - over a couple of different parcels of shares -  around one-third. The income generated over several years is some consolation - but I took my eye off the ball.

It is probably that opportunities exist in the listed property sector for takeovers due to the hefty discounts to NAV that many trade on. RDI had been trading at a significant discount for the last three years. Many other companies have not recovered their share price following the huge sell in 2020 when the global pandemic started to take a grip. Many private equity companies have built significant stakes in listed property companies so this is probably not the last takeover in this sector.

[Realised price: £1.2135]

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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