Xem thêm

The Ultimate Guide to Investing in Unlisted Property Trusts

CEO Khai Intela
Investing in commercial property can be a lucrative venture, but there are various ways to approach it. One option that is gaining popularity is investing in unlisted property trusts. In this guide, we will explore...

Investing in commercial property can be a lucrative venture, but there are various ways to approach it. One option that is gaining popularity is investing in unlisted property trusts. In this guide, we will explore the benefits of investing in a trust structure, how unlisted property trusts work, the different types of trusts available, and the key considerations when reviewing them.

Benefits of Investing in a Trust Structure

Investing in an unlisted property trust offers several advantages compared to other investment options. Here are some key benefits to consider:

  • Pooled Funds: By investing in a trust, you gain access to assets that would be difficult to purchase individually, such as large office buildings or major shopping centers.

  • Professional Management: Trusts are professionally managed, providing you with expert guidance and protection.

  • Reduced Risk: Internal gearing in unlisted property trusts is non-recourse to investors. This means that if there is a default, the collateral can be seized, but the investor will not be held liable for further compensation. This makes unlisted property trusts suitable for Self-Managed Superannuation Funds (SMSFs).

  • Regular Income Stream: Trusts provide a regular income stream through distributions, which can range from monthly to six-monthly payments.

  • Capital Growth: As an investor, you share in any capital growth that the trust experiences, proportional to your holding.

  • Tax Benefits: Unlisted trusts offer the potential for tax-deferred income, which can increase after-tax returns.

  • Professional Management: Trusts are managed by professionals who handle due diligence, debt, property, and tenant management.

  • Liquidity: Depending on the structure, unlisted property trusts can offer liquidity, allowing you to exit your investment at regular intervals.

  • Diversification: Unlisted property trusts require only a small investment, enabling investors to diversify across various properties and managers.

How Do Unlisted Property Trusts Work?

Unlisted property trusts provide investors with the benefits of direct property investment, along with the advantages of professional management. Unlike listed real estate investment trusts (REITs), the value of unlisted property trusts is primarily influenced by movements in the commercial property market, rather than the broader share market. This can result in lower investment volatility.

There are two types of unlisted property trusts: open-ended property funds and fixed-term, closed-end property trusts, also known as syndicates.

Open-End Property Funds

Open-end funds do not have a maturity date or a finite number of units. They can continue to issue units as long as they raise money, using new funds to purchase additional properties. To provide liquidity for investors, open-end funds usually hold a portion of the fund's assets in cash, pay out existing investors using new investors' funds, or sell assets if necessary.

These funds aim to increase diversification by holding multiple assets. However, it is important to have confidence in the fund manager's ability to buy or sell assets successfully.

Fixed-Term, Closed-End Property Trusts

Closed-end property trusts, or syndicates, hold one or more properties for a specified period, typically five to ten years. At the end of this period, investors vote on the future of the trust. The default outcome is usually the sale of the property, the winding up of the trust, and the payout to investors.

While closed-end property trusts lack liquidity during their term, they offer transparency as investors know exactly which property they are investing in. Additionally, by investing in multiple syndicates with low minimum investment requirements, investors can achieve diversification across various properties, locations, sectors, maturity dates, and managers.

Property Management

One of the key advantages of investing in unlisted property trusts is gaining access to professional property management services. The best property fund managers have in-house property management divisions that handle various aspects, including leasing, ongoing maintenance, concierge services, compliance, and rent collection. This alignment of interests between the manager and the investor ensures efficient and effective management of the trust's properties.

Distributions and Costs

Unlisted property trusts generate income through rental payments from tenants. These rental payments, minus expenses, are distributed to unitholders on a regular basis. The frequency of distributions can vary from monthly to quarterly or semi-annually, depending on the trust.

It is important to consider the costs and fees associated with investing in unlisted property trusts. These may include acquisition fees, ongoing management fees, property management fees, stamp duty, legal costs, and other expenses. It is crucial to review the Product Disclosure Statement (PDS) provided by the trust manager, as it outlines the fees and costs in a consistent format, enabling easy comparison between trusts.

Reviewing an Unlisted Property Trust

When considering an investment in an unlisted property trust, it is essential to review the trust's PDS, which contains detailed information about the trust, its assets, structure, fees, borrowing, and risks. Pay particular attention to the risks section, as it can provide valuable insights into potential challenges and downside scenarios.

Tracking Unlisted Property Trusts with Sharesight

Sharesight, a leading investment portfolio tracker, provides comprehensive information on unlisted property funds in Australia. Sharesight's database includes the latest unit prices and distribution information for retail unlisted property funds, with data updated daily from trusted providers like Morningstar. By signing up for a free Sharesight account, investors can easily track the performance of their unlisted property trust investments.

Sharesight

Sharesight is one of the few platforms that provide historical unit price and distribution data for unlisted property funds in Australia, making it an invaluable tool for monitoring investment performance.

Conclusion

Investing in unlisted property trusts can offer unique advantages, providing access to commercial property investments with the benefits of professional management. By understanding the different types of trusts available, considering the associated costs and fees, and reviewing the information provided by trust managers, investors can make informed decisions. Utilizing portfolio tracking platforms like Sharesight further enhances the ability to monitor and evaluate the performance of unlisted property trust investments.

Disclaimer: This article is intended for informational purposes only and should not be considered as investment or financial advice. It does not act as an offer or disclosure document. Investors should conduct their own independent research and seek advice from professional advisers before making any investment decisions. The mentioned content is provided by Cromwell Funds Management Limited ABN 63 114 782 777, AFSL 333214. Cromwell Funds Management Limited and its related bodies corporate and associates do not receive any remuneration or benefits in connection with the advice provided.

1