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Why I Love (Belgian) REITs And You Should Too

Why I love (Belgian) REITs and you should too

Heads up before you read these suggestions. These and other posts like them are my own thoughts and ideas. I’m not a broker/dealer, nor am I an investment advisor. I have no access to non-public information about publicly traded companies, and this is not a place for the giving or receiving of financial advice, advice concerning investment decisions or tax or legal advice.

2020 is now well underway and with the Coronavirus swooping across the globe infecting hundreds, the market is selling off all of the gains it made this year, and then some. The majority of stocks have gone quite a bit lower. However, thanks to their defensive nature, REITs were able to remain relatively steady.

Their defensive nature is first and foremost thanks to the predictable lease-based revenue. No matter what happens during the year, paying the lease you must. You can live another year with last year’s iPhone but it’s pretty hard to live (or do business) without a roof above your head.

A strong hold

Performance AED in 2019
This chart shows the performance of AED from 1 Jan 2019 to 1 Jan 2020. Source: https://live.euronext.com/en/product/equities/BE0003851681-XBRU#chart

REITs or GVV’s (Geregelementeerde Vastgoed Venootschappen) offer stability in times of instability thanks to their lease contracts. This was proven in 2019. It was an amazing year for the (Belgian) REITs.

They are with 17, the REITs that note on the Brussels stock exchange. They had a stellar year with Aedifica gaining +60%. Even the worst performer, Wereldhave Belgium, gained 11%. On average the return for this sector was 31%, including dividends. to put that into perspective, the S&P500 gained 33.07% incl. dividends.

Not only the Belgian REITs did amazing. Across the pond, the NAREIT (National Association of Real Estate Trusts) states that they returned 28.7%.

2020 is not so great yet but while the Coronavirus is slowing things down, 2020 can be another amazing year, maybe even “thanks” to that. Because of their defensive nature and high dividend payout, REITs are very attractive to hold. A net dividend of 3% is still a lot and is a rate a lot of investors yearn for. This is after the high Belgian withholding tax of 30%, though REITs with at least 60% in care property are only charged 15% (which is important for your (Belgian) tax deduction!).

Talking about dividends, REITs have a history of paying attractive dividends. This is typical for REITs, resulting from cash-flow-oriented business models focused on operating, acquiring and developing properties that generate recurring income streams. For 2019, Belgian REITs gave a net return of 3.2%.

In Belgium, they are required to payout at least 80% of their income. In the US the IRS requires REITs to pay out at least 90% of their taxable income to shareholders.

But a hard buy (at the moment)

There is one big downside to the Belgian REITs. Because of their strong performance in 2019, quite a few stocks are noting near or above their all time high and intrinsic value. Real bargains are hard to come by. There are a couple of stocks that could prove to be interesting to buy and hold in 2020.

I’m thinking of technology REIT subsectors like industrial, data centers, and infrastructure. These could continue producing strong total returns this year. Two other segments that could see further growth are elderly care and logistics. Both niches benefit from good growth prospects due to the aging population and the rise of e-commerce respectively.

Of course, like always, time will tell whether 2020 is a continuation or a transition year.

My favorite Belgian REITs for 2020

Below is a list of (Belgian) REITs that I’m looking into for a stellar performance in 2020 (even at current valuations):

  • AEDIFICA: The expert in Care property (elderly care). It has recently set foot in Finland by taking over Hoivatilat.
  • WDP: Focusses purely on logistics.
  • XIOR: Specialist in student housing in Belgium, The Netherlands, Spain and Portugal.
  • BEFIMMO: Specializes in office spaces.
Mr. FightToFIRE
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