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Why I love (Belgian) REITs and you should too

Last Updated on December 13, 2020 by Mr. FightToFIRE

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 almost over with the coronavirus still floating across the globe infecting thousands of people daily, but multiple vaccines are about to fight back. The market originally went into panic mode and sold off all of the gains it made this year, and then some, but quickly recovered.

The majority of stocks had gone quite a bit lower. However, thanks to their defensive nature, REITs were able to remain relatively steady for a while.

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.

(Belgian) REITs: A strong hold

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

They are with 18 (Inclusio joined recently), the REITs from Belgium that note on the Brussels stock exchange. They had a stellar 2019 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% in 2019.

But even they are not immune

2020 is a different story because of the impact corona had on our society. Even real estate deemed not to be immune. Although the differences between the segments and the individual companies are large. Some REITs performed stellar thanks to the boom in e-commerce due to the various lockdowns throughout the year. But these lockdowns are also the reason others haven’t recovered and might never recover.

With less than a month to go, 2020 is not so great but while the Coronavirus is slowing things down, 2020 was not a complete loss for some REITs, 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.

Turning into a solid buy

There was one big downside to the Belgian REITs. Because of their strong performance in 2019, quite a few stocks noted near or above their all-time high and intrinsic value. Real bargains were hard to come by. As we near the end of the year, there are a couple of stocks that could prove to be interesting to buy and hold in 2021.

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 explosion of e-commerce respectively.

It’s clear now that 2020 is a transition year, but one that gives interested buyers the chance to get into my favorite (Belgian) REITs at a fair price. Thanks to the low-interest rate, the strong dividend policy, and the ‘real’ assets in their portfolio REITs will quickly get back into favor with a lot of investors.

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

My favorite Belgian REITs for 2021

Below is a list of (Belgian) REITs that I’m looking into for a stellar performance in 2021 (especially at current valuations):

  • AEDIFICA (ticker: AED; ISIN: BE0003851681): The expert in Care property (elderly care). It has recently set foot in Finland by taking over Hoivatilat.
  • WDP (ticker: WDP; ISIN: BE0974349814): Focusses purely on logistics.
  • XIOR (ticker: XIOR; ISIN: BE0974288202): Specialist in student housing in Belgium, The Netherlands, Spain, and Portugal.
  • Ascencio (ticker: ASC; ISIN: BE0003856730): Since the take over of five Casino supermarkets in France, food stores make 40 percent of all rental income.

For more inspiration regarding stock investments: Read my article about the 19 best European dividend aristocrat stocks. Here I can especially recommend the section about the best dividend stocks in the Real Estate industry.

I'm a developer for a major financial institution in Belgium that is present in over 40 countries. I have over 8 years of working experience in the development of customer applications focussing on all aspects of banking. This helped me gain a deep understanding of the inner workings of a commercial bank. All of this experience in both banking and life culminates in this blog about personal finance and my fight towards FIRE.

This Post Has 2 Comments

  1. With the current drop, I start to look into real estate shares. Especially with the tax advantages on dividends, it is possible to get a nice dividend on a yearly basis.

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