Got a forwarded on an e-mail from a friend whose broker was pushing the Green / Hibernia REITs.
Obviously the hugh premium to NAV is a big stumbling block (I wont re-print the e-mail and the rationale given).
However, my reply was (numbers deliberately rounded / simplified for clarity):
Green are trying to buy good office at 5.75% at rack of 32 sq ft or c. 550 sq ft. The market however is now at just sub 5.5% (latest Blackstone purchase of the Platinum Portfolio or IPUT on 1 GCS) at rack of 32 sq ft or almost c. 600 sq ft
Above 1.40 per share, you are buying the Green REIT at a +50% premium (remember you have to allow for the set-up costs and broker commissions in the Green REIT which would be between 5-10% depending.
If Green do manage to win a good building, then it will have to pay c. 5.25%.
As an investor coming on at 1.40, you will therefore be paying 3.5%.
You also have to pay green 1% of NAV (in addition to other valid fees which you would incur anyway so ignore these).
Your net yield is therefore 2.5% at rack rents of 32 sq ft.
If Irish prime office rents doubled to London office rents at 60 sq ft, you will have bought at just below 5%.
You can buy any number of UK REITs today at discounts to NAV that have prime real estate at better yields and rents.
(they charge much lower fees than Green)
(I did the same example for Retail but it produces the same result)
Oh, and the UK is a semi-solvent economy that prints its own currency.