Strong REITs can withstand the Brexit fallout

TT he uncertainty surrounding the UK’s Brexit vote will present continued challenges for listed real estate investors, Cohen & Steers' Rogier Quirijns says. Quirijns believes the primary concern for investors is the impact on London, which is poised to suffer a more dramatic slowdown than the rest of the country.

However, while there are new risks to consider, Quirijns believes underlying fundamentals for many companies remain stronger compared to previous downturns. He cites stronger balance sheets and lower leverage, higher quality assets and a more robust sector focus, and an increased emphasis on income rather than developments. "This current sell-off has created potential opportunities in REITs that have built up a strong longterm income and growth profile," Quirijns says.

"Average leases in many REITs are in excess of 10 years and we do not believe the UK faces a severe recession or a 'Lehman' event – therefore cash flows should remain robust over the long term. "We prefer REITs offering dividend yields of between 4% and 6%, with 3-year growth rates of 10% to 30%. Many of these names should continue to deliver sustainable income and growth, despite the Brexit shock."