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11% Yield At AEW UK REIT Is Interesting - If Sustainable

Published Thu, 30 Jul 2020 13:10:03 -0400 on Seeking Alpha

Seeking AlphaREITs | United Kingdom11% Yield At AEW UK REIT Is Interesting - If SustainableJul. 30, 2020 1:10 PM ET|| About: AEW UK REIT plc (AEWRF)by: Tim WorstallTim Worstall Tech, banks, gold & precious metals, natural resourcesContinental Telegraph.cls-1{fill:#024999;}SummaryThe British commercial property market is undergoing wrenching changes, but this does mean a loss to everyone.
Retail and, to a lesser extent, office space are losing value considerably. Industrial space not so much.
So, a REIT concentrated in that sector with an 11% yield looks attractive - but only if that yield is sustainable.
The British property market
I've written a number of times here about different aspects of the British commercial property market. One point to make is that the irruption of the internet has meant an excess of retail properties. Some 20% (before coronavirus) of retail sales are now online, and some 20% of retail properties are empty. This is not a coincidence, and it is this, plus gearing, that led to the demise of Intu. That same move to warehouses out of which the retail work is done bolsters providers of the warehouses like Tritax Big Box.
Office space is coming under increasing pressure as the lockdown accelerates the home working - for at least part of the week - change.
So, there are areas where we really don't want to be in this market. However, as the Tritax case shows, there are also those who benefit from such changes. And even some operating at small enough scale - and therefore in possibly unfashionable sectors - that good profits can be made even in such a market.
AEW UK REIT
Which brings us to AEW UK REIT (OTCPK: AEWRF) which has a remarkable yield of 11% (OK, 10.9%), which is one of those things we tend to think doesn't happen unless the dividend is about to be cut.
So, the question is, will it be sustained? The Telegraph thinks so:

But AEW UK REIT's dividend looks safe, according to one portfolio manager who has... Read more