In general, I think real estate investment trusts (REITs) are great passive income investments. And one in particular has been attracting the attention of some smart investors recently.
Grainger (LSE:GRI) is the UK’s largest commercial landlord. It has – in my view – an enviable portfolio of properties in some attractive locations and strong rent collection metrics to boot.
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Grainger’s portfolio
With any REIT, one of the key things to focus on is its portfolio. It has over 11,000 properties, almost all of which are currently occupied by paying tenants.
In terms of location, these are distributed across major UK cities. And unlike other residential REITs, a significant number of them are located in London.
As a result, the company offers the opportunity to invest in property in areas where house prices are prohibitively high. But is this something investors should be looking for?
The rise in artificial intelligence (AI) brings with it an increasing risk of redundancies, especially for white-collar workers. And these are the people that typically live in cities.
There’s a risk that this might lead to lower demand for Grainger’s properties in the future. But investors can gauge the severity of that particular threat for themselves.
In the meantime, a couple of high-profile investing names have been taking an interest in the stock. And while that’s not itself a reason to buy, it’s worth paying attention to.
Smart money
One individual who has recently been betting on Grainger is Mike Ashley – of Sports Direct fame. The former Newcastle United owner has acquired a stake equivalent to 3.1% of the firm.
I’m choosing my words carefully here, because the number of shares Ashley has actually bought is zero. He’s made his move using derivatives, rather than buying the stock directly.
These are – or should be – almost identical to the underlying shares from an economic perspective. The only real difference is that they aren’t eligible for stamp duty.
A non-economic difference, though, is that they don’t come with voting rights. So Ashley is presumably planning to be a passive participant, rather than an active investor.
An institution that has been buying shares, though, is Norges Bank. The firm manages the Norwegian Sovereign Wealth Fund and has increased its stake to 9%.
The company has over 9,000 equity investments across the world, which is a huge number. But I do think it’s significant that Grainger is on its radar as a stock worth buying.
Time to buy?
I think there are some really interesting opportunities in UK REITs at the moment. And while Grainger has been on my list, it’s never been my top opportunity.
News of some high-profile investment names looking to get involved has caused the stock to climb this week. And that’s probably made it slightly less attractive.
If the share price settles down a bit, I might well come back to take a closer look. But for the time being, I think there are more attractive ways to earn passive income from property.
