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I think there are some folks around who know a lot more about UK investing than I do, so I'd be interested to hear their thoughts.

I've been looking at a couple of the the very-much-unloved large UK REITS, specifically British Land (BLND:LSE) and Land Securities (LAND:LSE).
The basic investment case is simple: sort of an income play, or perpetual bond substitute. In short, barring a blow-up, their lofty dividends might reasonably be expected to rise roughly with inflation over time, so the yields on offer are "real" yields.

They are registered REITS, so there is 20% withholding tax on their very high dividends for those not based in the UK.
If you are in a tax treaty country, you will generally get that as a credit on your tax return, so it's not a problem, you get their current yields of 7.11% and 6.19%.
For those in non-treaty countries, and even after the 20% withholding tax they're paying 5.0% and 5.6% right now.

Reaching for yield (and in fact yield investing in general) is generally an extremely bad habit, but sometimes things do get oversold when the pessimism pendulum goes a bit too far. I don't see any really good case for value generation sufficient to cause the price to offer much return over time. But they are down a lot, so maybe "up a little" is a bit more likely than "down a lot"? They are both trading down about 30-38% from their highs about three years ago.

Certainly for those who think that office life is gone for good, a concentration in London offices is not good, but I am not strongly in that camp. Their revenues are of course in sterling, but all the Brexit press seems to have caused observers to ignore the fact that the pound has been very slowly rising on a trade weighted basis for eight years now, and is now higher than its fairly steady range 2009-2013 well before the Brexit vote.

I haven't done much reading yet on these specific firms, this is just a "might want to look here" thought. Does anyone have any insights?

Jim

third-ave value has written a bunch on uk RE space, see archives

in addition to valuations, uk div payers have been a great way to squeeze out much of my foreign tax credits.

weirdly , unlike american equities, i have had no realized losses in EU equities since c19 vaccine un-busted all economies.

No information, just a question, unfortunately except to share that the international real estate ETFs RWX & VNQI are mildly negative the last 6 months and below their 8 month SMAs after a tough drop from their spike high in late September.

Does that 20% withholding apply to said UK REITs held in a US retirement account (Fidelity is the provider)? (Traditional IRA)? As I never get tax statements for that IRA I would be surprised, but then I've never directly invested in individual foreign stocks or funds.

FC

Does that 20% withholding apply to said UK REITs held in a US retirement account (Fidelity is the provider)?

My entirely uninformed guess is that yes, the withholding tax still applies. Plus, as it's an untaxed account, my uninformed guess is that there is no way to claim a tax credit for the tax withheld, unlike shares held outside a retirement account.
But check with someone who actually knows the real answer, not someone who is guessing based on extrapolating from other situations.

In some cases I have found the most reliable answer is obtained by buying a small number of shares and waiting for the first dividend to be credited. Particularly true for anything in the Brookfield family of countries because of the multi-jurisdiction spread of the source of the dividends.

Jim

i beieve you are still in general correct. I havea couple of foreign stocks and get foreign tax witheld on divvy in my rollover and my CPA says, forget aboutit..no deduvction.

one can also buy shares as ADR's (american depository receipts)many of the larger UK established companies have these quoted in usa

here i a quick article , eg I have TSM

https://finance.yahoo.com/news/10-best-adr-stocks-...

British Land (BLND:LSE) and Land Securities (LAND:LSE).

For whatever it's worth,

BLND at 330 pence, dividend yield 6.93%, net yield after 20% withholding tax if that matters to you: 5.55%
LAND at 493 pence, dividend yield 8.15%, net yield after 20% withholding tax if that matters to you: 6.52%

I don't think buying on yield is a good idea in a number of different ways. However it is quite possible that the reason here is an overshoot to the downside on price, not evaporation of the underlying business merits. And, given that they are REITs, [cyclically adjusted] yield is actually not a bad yardstick. Note that these businesses are essentially 100% UK local and tariffs are not really an issue : )

I have opened starter positions in these two.

Jim

As a UK investor who rarely invests in property companies it is worth noting that you can get higher yields on smaller REITs in the UK. LAND at that yield is quite astonishing. We are probably past the bottom of the market for property prices. Industrials and warehouses have seen price increases for some months, offices are starting to join in.

Smaller REITs have been bid for very recently (last year I bought shares in some smaller REITs for the first time). I am not a dividend investor but that sort of yield, together with property price increases, was too tempting.

deucetoace

I am not a dividend investor but that sort of yield, together with property price increases, was too tempting.

I am *definitely* not a dividend investor, but that was exactly my thought. I bought some, and I intend to just throw it in a corner and forget about it. I expect to look back in a few years and realize it paid for a lot of beer and pizza, and earned a higher rate of return than any loan I might have in the interim. I am embarrassed to admit I haven't really done nearly enough reading on them yet to feel well informed, but there is some thought that these biggies are likely to be pretty resilient even if dividends or prices dip for a while.

Jim

I bought some, and I intend to just throw it in a corner and forget about it.

OK, I couldn't help but looking. Up 7.2% and 8.3% so far, and a further 3.6% if measured in the US dollars I sold to enter the position.

I expect some volatility (translation: lower prices may come), but still, early signs are that it seems to have been a not-bad entry point.

Jim

Some of the UK housebuilders are worth a look Barratt, Persimmon, Berkeley.

The UK also has a very pro housebuilding Gov now looking to grow housing starts and they are trading at 5 yr lows and around net book or below. Often pay a nice divi of 5% too.

I have some.

For whatever it's worth,
BLND at 330 pence, dividend yield 6.93%... [minus possibly credited REIT withholding tax]
LAND at 493 pence, dividend yield 8.15%... [minus possibly credited REIT withholding tax]

At the moment,
BLND at 390.4 pence, up 18%
LAND at 633 pence, up 48%

I presume this is mostly a short term move and prices may dip again, but it's a nice start.
Indicated forward yields currently 5.77% and 6.41% before 20% REIT withholding tax.

Again, dividend driven investing is almost always a bad idea, but as these are REITs forced to have high payout ratios (90% of property rental profits before any realized gains), the dividend yield correlates closely with the theoretical earnings yield, so it's not an entirely useless crude guide to valuation levels. Whether they are sustainable or not of course requires understanding the underlying businesses, but if things continue as they are (a big if), implied valuation levels are not hard to estimate.

The secret to happiness in investing is to look at the prices of your holdings frequently only when they're rising : )

Jim

They've undertaken discounted Rights Issues before same as some of the housebuilders. This often makes me wary, thoughts?

They've undertaken discounted Rights Issues before same as some of the housebuilders. This often makes me wary, thoughts?

Not necessarily.
Obviously it's better to invest in a business that doesn't have a crisis, but unforeseen things do happen. That's certainly the classic risk of anything real estate related: periodic explosions due to leverage. As Mr Munger once noted, the reason he wasn't a real estate investor is because any string of return numbers followed by zero is still zero.

To me, it depends whether or not you determine that the "bad thing" that triggered the capital raise removed your investment thesis and belief in the future.

If you still trust the firm's prospects, just participate in the capital raise. If not, starting thinking about the best moment and method to exit.

Jim

Financial historian and former fund manager, Russell Napier's perspective on government debt crisis management options has lead me to the following conclusion:

One of the most attractive investments, I can personally make, is buying residential property with leverage in the U.K..

The U.K. property market covers a very wide range of regions from London to small towns close to bigger cities, in places like Scotland and Northern Ireland. As well as residential and commercial buildings, sites, houses, apartments, storage units, factories and all kinds of property dynamics, that can drive prices above and below national averages.

Russell Napier suggests there are only five ways
governments an reduce deficits:
* Austerity
* Economic Growth
* Default
* Hyperinflation
* Financial Repression (defined as moderate inflation and government-imposed low interest rates)

Napier believes financial repression is by far the most probable outcome, as the other four options are highly unlikely for various and obvious reasons.

In such a scenario, one of the most advantageous investments is to purchase property using debt. This strategy benefits from low interest rates on the debt, while the property's value appreciates with inflation.

The U.K. government has understandably, given its situation, taken a sledgehammer to the buy to let market, by imposing large increases in taxes (higher SDLT & CGT, mortgage interest relief restrictions, with likely further property tax rise to come in water charges and council taxes) on non residential single family homes.

For me personally buying my children houses with high loan to value long term fixed rate mortgages and buying a larger private residence is what I should probably do, from a purely financial perspective. There are of course negatives, not least the higher costs associated with larger houses.

I have not looked into U.K. property investment vehicles but expect them to benefit from government financial repression policies in future. I would want to know a lot about the specific assets that are owned; how they are valued; discount to net asset value, tax structure, management skills etc. There are knowledge people in this sector, who will know what to avoid and what might be attractive. For example, I am hearing residential property prices in London are falling. We know that the office market has been affected by work from home. Amazon has changed the high streets etc. On the other hand places like Scotland and Northern Ireland are cheaper. I know of a company doing very well, yield wise, on storage units in Northern Ireland, as the economy benefits from post Brexit arrangements, having a foot in both the UK and EU, which is unique. Point is, there are probably U.K. property public investments, run by managements with good track records. Which might be a nice idea against a backdrop of low interest rates and creeping and enduring inflation…

I mentioned Berkeley Homes as a brown field house builder with a long track record of being clever operators in that specific sector of the property market. U.K. government is also strongly behind house building. Again understandable given growing population and chronic housing shortages. So maybe house builders in the uk is worth considering. I haven’t looked at valuations but they are usually reasonable to very cheap, compared to the nose bleed equity valuations in the US for example. Due to the highly cyclical nature of demand.

Anyway, a bit of a ramble and late reply. I might take a look around the U.K. listed property companies. Might be less work than buying a bigger house.

Another thought came to mind is that i know there is a chronic shortage of student accommodation in the U.K.

Two listed entities that seems to be major players in this area are: Unite Group PLC and Empiric Student Property PLC.

I know absolutely nothing about them other than they own student accommodation and there is a serious shortage of that. Mr Market probably well away but it still fits with the yield and inflation idea. Large scale student accommodation also sounds highly effective for property owners.

Anyway, a couple of things for me to look at…thanks for the idea. Nice work bottom ticking your two picks btw!

I had a look at these two U.K. student accommodation REITs today. Quite mediocre investment opportunities but enjoyable learning about them. Empiric would have been a great buy back when Jim suggested UK REITs earlier this year…

Let me know your thoughts.

I haven’t looked at the higher yields on the ones Jim bought. What’s the reason for that situation?

Unite Group PLC (UTG.L) is the market leader in UK student accommodation. The London listed company, has REIT status and therefore does not pay corporation tax on rental income.

There is currently a chronic shortage of student accommodation in the UK, due to increasing demand from overseas students, encouraged by universities seeking the higher fees that are earned from international students. On the supply side, increased regulation and taxation has pushed smaller landlords out of the market. This combined with higher development costs and planning challenges, has made new student housing developments less attractive. The rising demand, in the face of stagnant supply, has resulted in a 27% increase in rent prices over the past six years. The chronic situation, is expected to continue for many years to come, by all market commentators with no radical changes on the horizon.
Owning property, with some leverage, in times of inflation and low interest rates is likely to out perform cash. With cash loosing it’s purchasing power over time. Some economists believe ‘financial repression’ (inflation and forced low interest rates), is the most likely political response to an unsustainable and mounting Government debt crisis.
Unite have strong ties to the UK’s leading universities with various joint venture property projects, which are likely to result in very long term relationships.

Unite Group PLC recently made an offer for it’s smaller rival: Emprici Student Property PLC (ESP.L). The cash (28%) and Unite shares (72%) offer, values Empiric at £713m and is currently (12th June 2025) 2.7% below Empiric’s market cap. The deal looks likely to proceed, with talks and an opening of it’s book to due diligence under way. Under UK takeover rules, Unite has until 3rd July 2025 to announce a firm intention to make an offer, or walk away. The potential acquisition is at a discount to Empiric’s book value, making the cash element attractive to Unite shareholders. Both companies are trading at similar price to book discounts, so the equity element is not so significant.
Some key financial metrics of each firm are shown below.

Unite (Empiric)
Market capitalisation: £4.1 Billion (£695 Million)
Beds: 68,000 (7,700)
Market cap to bed ratio: £60,521 (£90,208)
Dividend yield: 4.43% (3.59%)
Payout ratio: 80% (88%)
Earnings yield: 5.2% (4%)
Debt to property assets LTV: 24% (27%)
Interest cover: 6.2 (2.3)
Debt to maturity 3.8 years: (2.3 years)
Average cost of debt: 3.6% (4.5%)
Price to Book ratio: 86% (87%)

Investment Case
This is not a hugely attractive investment but is perhaps significantly more attractive than holding cash in the UK, with a higher cash return yield and more importantly a dividend that would increase with inflation, plus further expansion growth from the reinvestment of the capital not paid out. Management of Unite state that it’s return on capital is 10%. There is also the possibility of increasing leverage, from the current low levels and locking in longer term lower interest rates, if interest rates continue to fall.

Risks
Any change in demand or supply that negatively effects occupancy rates such as: government immigration policy effect on foreign students (1). Demand for university places from UK students could decline due to financial pressure and lack of government funding (2). Inflow of capital from private equity into building out new developments and eventual over supply (3). Increased conversion of unused office space to student accommodation. Increased remote learning.
Any dramatic increase in leverage, followed by higher interest rates or falling property values.
Health & Safety responsibility to young people in densely populated buildings.
Project risk of major construction projects.
Acquisition risk of not easily integrating the culture and systems and processes.

1. Management say foreign student numbers are up 14% in past year as the Labour government are pro foreign students.
2. This has already happened, with UK students funded by student loans since 1990 and no decline in interest to date.
3. This has already happened with Lone Star Funds £212m in 2023; KKR 544 bed deal in 2025; Goldman Sachs $140 million in 2024. There have been a combination of PE buying existing units and building new capacity.

Conclusion
Probably better than cash for a UK investor like me and not much risk and should do well in an inflationary environment. Less attractive to international investors, as unknowable foreign exchange rates can easily wipe out yield and cause gains or losses unrelated to the business but could still server as a part of a wider fx diversification strategy.

How about the ftse 350 index? Forward PE 11.5 and yield of 3.58%

If that multiple and yield is correct (and it appears to be from a quick search), it does not sound like a terrible idea. I would guess you have the large FTSE 100 firms giving international exposure. You probably have low profit growth, with high dividend payout ratios. Which isn’t always a bad thing if the average management team is not so great at capital allocation. You likely have significantly lower compensation and SBC. You probably don’t have much technology weighing. You have greater exposure to a stagnant U.K. economy and stretched government finances. But respected institutions and a history of not defaulting on debts. But all in all, if the numbers you quoted are accurate, it’s sounds like a reasonable place to allocate part of one’s portfolio, if a decision has been made not to pick individual stocks; to invest in equities, to invest in sterling. All of which come down to personal circumstances and preferences. Probably less risk for the average investor such as me…

Yes, this would be my favoured index if you want general exposure to the UK and it is relatively attractvely valued, plus you get exposure to small caps too. Looks like the smallest constituents have a market cap of around £450m

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