Why the Timing’s so Right for REITs

Advice to the Advisors

Sheaff Brock Institutional Group | REITs investing | real estate income and growth portfolio

Why the Timing’s so Right for REITs

There’s nothing “new” about Real Estate Investment Trusts, companies that own and manage income-producing real estate. In fact, REITs came on the scene more than sixty years ago and have increased in popularity with income-seeking investors. Since, by law, REITs are required to maintain dividend payout ratios of at least 90%, the dividend yield can represent a strong advantage over both equities and bonds. Investing in REITs also offers simplified tax treatment as compared with direct ownership of income-producing real estate. There’s nothing “new” about Real Estate Investment Trusts, companies that own and manage income-producing real estate. In fact, REITs came on the scene more than sixty years ago and have increased in popularity with income-seeking investors. Since, by law, REITs are required to maintain dividend payout ratios of at least 90%, the dividend yield can represent a strong advantage over both equities and bonds. Investing in REITs also offers simplified tax treatment as compared with direct ownership of income-producing real estate.

Although REITs can be purchased through mutual funds and ETFs, the new Sheaff Brock Real Estate Income & Growth portfolio bears only slight resemblance to those choices. With its portfolio spread of small to mid-sized REITs of medical properties, apartments, storage facilities, hotels, infrastructure, retirement community properties, timberland, even billboards, the Sheaff Brock Real Estate Income & Growth portfolio is diversified, yet nimble. 

At the same time, in designing the portfolio, great care was taken to keep the Sheaff Brock Real Estate Income & Growth portfolio focused on downside risk, avoiding REITs with high leverage. Very large funds (such as the $34 billion Vanguard—VNQ) might need to buy a majority interest in a smaller REIT just to invest a mid-single-digit percentage of their assets; and due to trading volume one position might take many, many days to buy or sell. In the case of REIT portfolio management, smaller portfolio size equates to flexibility in entering or exiting positions; the Sheaff Brock Real Estate Income & Growth portfolio represents low leverage, high diversification—and a tilt toward small to mid-sized companies.

In a special interview with our Institutional editor, Managing Directors Ron Brock and Dave Gilreath explained the special timing factors that encouraged them to expand the firm’s portfolio offerings beyond stocks, fixed income, and options, and to venture into income-producing real estate:

There’s nothing new about Real Estate Investment Trusts; in terms of nimbleness and diversification, there’s a whole lot of “new” to be excited about in the Sheaff Brock Real Estate Income & Growth portfolio!

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