WisdomTree targets technology-focussed real estate
WisdomTree has launched a property ETF focussing on REITs servicing the tech sector.
The WisdomTree New Economy Real Estate UCITS ETF (WTRE) tracks the CenterSquare New Economy Real Estate UCITS Index.
The index is built by CenterSquare, a Pennsylvanian active property fund manager.
Centersquare analyses global REITs to determine how technology focussed they are. This is done primarily by looking at their tenants.
Once a universe of tech-focussed REITs is built, companies are then screened based on fundamentals., with debt-ridden companies removed.
Companies are then weighted based on tech sector exposure, fundamentals, and value. Each stock’s weight is capped at 7.5%. The end result is a basket of REITs focussed on ecommerce warehouses, data centres and telecoms towers.
The fund charges 0.45%.
Bernie’s commentary –old model (malls); new model (internet land)
The old model for REITs was all about shopping centres and malls. In the 1960s and 1970s, a great way to get rich was to buy a bunch of farmland/swamp in the outer suburbs—the kind of place that Shrek would live. Then turn the swamp into a slick shopping centre with scented air conditioning and marble floors.
The next step was to get up-market brands like Ralph Lauren in as anchor tenants with rental incentives. And then get foot traffic up via an industrialised marketing plan. (Movie trailers always helped, as malls host cinemas). Mall bosses then made their cream by ripping the faces off their lower tier tenants.
But online shopping killed that model. Malls, once the places to be and be seen, have been replaced by Amazon and Netflix. Foot traffic and sales have fallen, meaning every tenant wants cheap rent. Simon Property and Scentre Group’s share prices have gone nowhere in 10 years. Frank Lowy has left the building.
The winners in the transition have been data centre and ecommerce REITs. Names include Goodman Group, Prologis and Equinix—whose share prices have rallied strongly the past 10 years.
The theme this ETF – and others like it, like Global X’s VPN – is tapping into is very real. It is certainly not a fad or a gimmick—as thematic ETFs sometimes are. I guess the question is whether the theme is fully priced: everyone knows ecommerce is eating the mall. Meanwhile rising interest rates are bad for REITs, as they all carry debt.