in January, without saying where it got the information. McGrath declined to comment on the report.
McGrath’s company, created in 2008 by a merger between F&C Asset Management’s property business and REIT Asset Management, took advantage of the drop in U.K. prices last year following the collapse of Lehman Brothers Holdings Inc.
“We said this is the worst it’s ever been; there are people out here who are weak and desperate to sell,” said McGrath. “This is our opportunity, our time.”
This doesn’t surprise me.
In terms of commercial and retail units, there is value out there.
Basicially, the net yield is positive.
What a REIT like this needs to do, is a thorough examination of the tenant in order to access the strength of the underlying covenant. They have the benefit of a 3-4 year slump to shake out those with good credit from those with bad.
With a positive yield, the danger of falling capital values is minimised as the cashflow will keep the bank loans paid.
I still think it’s too early though.
€20 billion annual government borrowings paper over a lot of cracks in the economy.
A bit of added perspective, last year AIB sold some more of its branch network.
These yielded between 6%-7%.
The market has since fallen further, meaning the yield has increased.
Currently, SCD residential is still yielding sub 4%.
The yield did not change for those who bought. Only those who kept their powder dry could hope for an increased yield. It’s important to have blue chip tenants who can’t liquidate out of their leases to get out of upwards only rent reviews. The increased yield is to compensate for the increasing risk of this risk event and also the risk of legislation negatively effecting upwards only rent reviews.