Big Box warehouses are large format facilities that store and manage the movement of goods.
As businesses, there is nothing sexy about them. They are a form of real estate investment trust (REIT) and the economy’s equivalent of plumbing – usually hidden from sight but serving a vital purpose that is largely unnoticed until it goes missing.
REITs own warehouses, office buildings, shopping centers, seniors’ homes and apartment complexes that they lease to tenants. They are popular with investors seeking income because after collecting the rent and paying their expenses, REITs pay out the bulk of what’s left to shareholders in the form of dividends.
What makes Big Box warehouses different from other warehouse REITs, is that the properties are modern, strategically located, highly efficient centres and logistics hubs. They hold finished goods for distribution to consumers or parts and semi-finished goods used in assembly elsewhere.
In a world of global trade and overnight delivery of e-commerce purchases, these REITs are located around the world and have become even more attractive investments.
Tritax Big Box REIT plc is an example. It is one of the UK’s biggest large-scale logistics real estate companies. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index. Tritax manages properties, holds land suitable for development and has a high quality portfolio. Its customers include some of the biggest names in retail, logistics, consumer products and automotive. They include: Amazon, Kellogg’s, L’Oreal Marks & Spencer, DHL and TJ Maxx.
In the first half of 2019, the Tritax portfolio was worth £3.85 billion. It had 58 properties in the UK with average lease terms of 14.3 years. The dividend has increased in each of the last 5 years.
Tritax is an example of the case for going global with REITs. Canada’s REIT universe makes up about 3% of the global total, so there’s lots of opportunity elsewhere.
Tritax is a component of the Harvest Global REIT Leaders Income ETF (TSX: HGR) which aims to capture these features by offering leading select holdings and income diversity outside of Canada.
The ETF stands out because it is global and owns preeminent leaders in each country where it invests. The companies are leaders with a history of consistent and growing dividends.
The ETF invests in an actively managed portfolio of between and 20 and 30 developed market issuers with an average market cap of CAD $27 billion. Most are outside Canada. The average dividend yield of the portfolio as of Sept. 30, 2019 was 2.87% and the current monthly distribution yield is 5.30%.
For more on Harvest Portfolio Group ETFs click here.
The views and/or opinions expressed in the blog are of a general nature and are for informational purposes only. Blog contents should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Investors should consult their investment advisor before making any investment decision.
