The "Great Fire Sale of London" Offers Extreme Upside

The United Kingdom's decision to leave the European Union - "Brexit" - is a red-hot vortex of uncertainty. British politics, society, and of course, business are all up in the air right now - and have been since the referendum in June 2016.

The UK has a general election next month that may very well determine how or even if Brexit happens. Beyond Brexit, all parties are making big promises to the electorate, to boot, the cost of which could be an additional drag on the world's sixth largest economy.

Investors, as we all know, hate uncertainty. Personally, I could never figure out why. All that chaos is like catnip for me; the bargains can be unbelievable.

Right now, for instance, some of the most prestigious, expensive real estate on Earth is trading at unthinkably cheap prices; double-digit gains are practically built in.

Here's where I think the best value is...

[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]

Uncertainty Is Keeping a Lid on London Prices

London's role as a global city and command center of the world economy means that big, multinational firms have a big footprint in British capital.

But businesses are avoiding and in some cases actively fleeing London and the wider United Kingdom right now, looking to hang out their shingle in places like Dublin, Frankfurt, and Paris that are unambiguously in the EU.

Have 28 Seconds? You could make $2,353 - and you won't need to buy a single share of stock up front to collect this cash, or spend a nickel on anything. Click here to learn more...

The Brexit Fur Ball has put the pound sterling under some pretty heavy pressure off and on since June 2016; it tends to move lower around big parliamentary votes and European summit meetings - go figure. Sterling has been near multi-decade lows, contributing to the sense of unease and uncertainty.

It's like a low-grade panic - "short-termism." Everyone is so focused on the next quarter or three that they've lost sight of the big picture.

That big picture is this...

London has been one of the world's most important cities for the sunny side of 500 years now. People have been gravitating from all over the world to the bright lights and economic opportunity London offers for even longer.

The pound sterling has been one of the world's most powerful, in-demand currencies for about as long.

My point is, no matter which path Brexit eventually takes - hard Brexit, soft Brexit, no Brexit, or some other combination thereof - London will still be London. It will always be a major financial center. People will come, and they will still need places to live, shop, and wine and dine.

A weakening pound, whether that's down to a slack economy or unfortunate Brexit outcome, will coax foreign buyers back into British markets.

It'll be bumpy, and it may very well be downright ugly, but investors who hold their nerve and buy London offices, retail outlets, and industrial properties will look mighty smart - and rich - in the long run. Those willing to buy now and buy more when prices decline will look even better.

That means London-centric real estate investment trusts (REITs) are the best way to go here...

Here's the Slice of Britain's Economy to Own

I like industrial properties right now. These are the warehouses and "last mile" shipping centers for the big e-commerce names like Inc. (NASDAQ: AMZN).

This is a fast-growing segment, and it will be for years to come. Here in the United States, REITs with exposure to this market trade at a significant premium to net asset value and high cash flow multiples.

Fast Money: This powerful secret made one man a millionaire. Now he's sharing it live on camera - find out how you could use it to become $2,918 richer in less than a minute. Click here...

In the United Kingdom, however, they're trading at significant discounts.

Tritax Big Box REIT Plc. (LON: BBOX) owns what it calls "big box" warehouse space all over the United Kingdom - and business is fantastic.

As of the latest report, it has 41 million square feet of big-box space and other logistics assets. Tritax also owns 2,800 acres in total, composed of a combination of owned and optioned land and other economic interests, such as development management agreements. This land could be developed into an additional 41 million square feet of logistics property.

Chair Sir Richard Jewson recently commented on the prospects for his company in light of Brexit. He said, "With Brexit contributing to an uncertain economic environment and making it more difficult for companies to grow their profits, the operational efficiencies and cost savings offered by Big Boxes remain compelling to occupiers. Businesses across industries have signaled their intentions to invest in logistics infrastructure, including new warehouse facilities as well as systems and automation, to facilitate efficient supply chains. The environmental impact of real estate also creates demand for modern, energy-efficient buildings like ours, which support our customers' sustainability programs. The quality of our portfolio and customer base means that irrespective of conditions in the wider economy, we are confident of continuing to deliver secure and growing dividends to shareholders, as part of an attractive total return over the medium term."

That's a mouthful, but I happen to agree with Jewson's optimistic forecast - that's why I'm excited to tell you about this REIT.

BBOX shares currently trade right around book value and have a target yield of 4.5%. Once the smoke of the elections and Brexit clears, these shares should trade several multiples higher than the current stock price - and that's just to catch up with the pricing of industrial assets in other parts of the world.

Land Securities Group Plc. (OTCMKTS: LSGOF) owns what it calls 24 million square feet of well-connected, experience-led retail, leisure, workspace, and residential hubs, with a growing focus on London.

Right now, 65% of its assets are in the core London marketplace. It owns office, residential, and retail spaces that are geared toward the - you guessed it - Millennial and Generation Z segments of the population that are among the fastest-growing in London.

A "Blueprint to Financial Freedom": This guy used this secret to become a millionaire. Now he's sharing it live on camera - and you could learn how to set up a series of $822... $1,190... $2,830 payouts every single week.

CEO Robert Nole talked about the business when presenting half-year results earlier this year, telling analysts and investors that "In contrast, London has pretty much shrugged its shoulders at Westminster with most market segments holding up well. There was good demand for Grade A space and strong investor demand during the year, albeit we saw a quieter first quarter of 2019. Against this backdrop, our operational performance has been good. We've retained a high occupancy level, our pipeline of schemes now extends to over £3 billion (US$3.86 billion), and we expect to grow this further. And, following the actions we took this year and last, earnings growth is strong. The difficulties in the retail market, particularly shopping centers and retail parks, are reflected in our valuation and reduction in NAV. But, importantly, we're financially strong, with a prudent level of debt and great financing facilities, and this enables us to look through the current environment and turn our attention to future growth."

The shares trade at a discount to net asset value right now and yield about 4.5%. Similar property portfolios here in the United States would be valued close to twice that of Land Securities.

The bottom line: Freaked-out, short-sighted investors and obstinate politicians have made UK REITs unreasonably cheap right now.

Brexit and elections are making things messy, but fortunes are born in messy markets. The best way to make an enormous amount of money right now would be to pick out a collection of UK REITs, like the ones I've just showed you, that are financially solid and have sensible plans for growth. Buy a little now and then - and buy more every time bad news causes a sell-off. When the dust settles and the world realizes that London is still London, you should make a massive stack of cash to go along with the yield payouts you've been collecting the whole time.

One last thing: These are British stocks, usually listed in pence, though some of them trade in dollars in the United States over-the-counter. Land Securities, for instance, trades here under the ticker symbol LSGOF, but it's thinly traded, so it'd be best to use a limit order if you go that route. To get the best bang for your buck, however, you'll need a broker with some chops in trading foreign securities. A quick glance around the web shows Interactive Brokers Group Inc. (NASDAQ: IBKR), Charles Schwab Corp. (NYSE: SCHW), and Fidelity Investments are noted for their ability to execute international transactions.

We've Uncovered the "World's Perfect Cannabis Seed" with 10x Potential

This little-known cannabis player is reshaping the entire industry. Its team of world-class growers has spent thousands of hours breeding plants... and what they've created is something we in the industry are calling "The World's Most Perfect Cannabis Seed." Right now, our analysts believe this tiny $1-per-share cannabis stock could be in for historic profits. Learn more here.

Follow Money Morning onFacebook and Twitter.

About the Author

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

Read full bio