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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Investment Strategies / Mechanical Investing
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Author: TheReitStuff ⎊☼🐝  😊 😞
Number: of 6243 
Subject: UK REITs at bargain prices.
Date: 10/01/26 4:33 PM
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Today, UK REITs are hitting lows they haven't seen in years suddenly, all in the space of hours.

Most of them have cheap funding locked in and rather low gearing compared to US and EU REITs.

I picked up some Safestore (SAFE.L) today. (This is not a recommendation). The last time SAFE.L was 500p, was back in 2019.

They're building out self-storage facilities across the UK and Europe, and operating existing stores.

Their debt LTV is 29%. Their EPRA earnings yield (operational earnings) is 8.2% / EPRA PER of 12x.

Their earnings have been temporarily suppressed by an effect called 'lease-up' where it takes about 5 years from finishing a new store to having stable occupancy e.g. 75-85%.

During that time, you're paying the cost of the land, staff, and energy without the full corresponding operational income you hope to have.

They began to build quite a large expansion after covid, and so lease-up is creating 'negative earnings' at a number of new sites which cancels out the earnings growth elsewhere.

I think it's reasonable to expect about 5-6% earnings growth on average in the next 5-6 years, between lease-up, new stores and LFL growth. Maybe more if inflation runs high.

Along with a 6% dividend well covered about 1.3x by operational earnings.

The stock trades at a discount to NAV today of about 53% (!) - a bit weird for a profitable growing business.

Analyst consensus for 1 year forward is about 40% higher than today's price, 700p vs 500p. (markets.investorschronicle.co.uk: Safestore Holdings PLC (SAFE:LSE) Share price, analysis, charts, news, dividends, EPS forecasts, annual reports and RNS)

There's potential for a bid - bid activity for a competitor within the last year had pushed SAFE's price up to 837p (vs today, 500p).

It might surprise you to hear that Europe is about 30 years behind the US in terms of self-storage facilities.

USA: 7 sqft per capita.
UK: 0.9 sqft per capita.
EU: 0.3 sqft per capita.

Which is even more surprising when you consider UK homes are so much smaller than US homes to begin with.

There are likely to be tax complication for non-UK investors, for example, non-UK investors I think pay 0-20% withholding tax on dividends, it depends on the type of dividend.

I think anyone investing in REITs/property companies outside their home country should look into the tax angle carefully.

Hope you found this interesting.

TRS

PS As always: Please double check all my claims above for errors, this is not finance advice, etc.
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This community has written 589 posts about Non-US Stocks. The article-length ones it recommended most:
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