Waypoint and REITs
Hi, I was reading a newsletter that discussed safe options for 2024. One mentioned Waypoint and a number of others suggested REITs. What are your thoughts on both Waypoint and REITs more generally as we get into the swing of 2024?
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Answer
Hi Michael,
There has been a lot of negatively around property over recent years and the impact higher interest rates will have on valuations. The market has sold down REITs, in many cases, well below the carrying values of their property portfolio pre-empting future declines in valuations which take time to filter through. This varies between individual REITs depending on the quality and type of underlying exposure, the quality of their balance sheet, management and so on. We do think the sector is throwing up opportunities, albeit, the majority have moved up from their lows.
We don’t like concluding that a sector is ‘safe’ or ‘risky’ because there are so many variables at play under the hood. From a balance sheet perspective, REITs generally are solid while asset quality by and large remains sound, but risk should always be considered on a stock by stock basis.
Waypoint (WPR) is interesting, it owns a portfolio of service stations and convenience stores, trades on 13x and yields ~7%, has a solid balance sheet and so on – it’s a quality operator. We have looked at this for our Emerging Companies Portfolio in the past and will await FY23 results due out on the 26th February before making a definitive call, however we do want to increase our exposure to property this year.
