PROPERTY A-REITs
properties held by listed A-REITs are West-
field Sydney, owned by Scentre Group, and
Governor Phillip and Governor Macquarie
towers, owned by Dexus and GPT.
STUART CARTLEDGEQ
Should I buy a portfolio of
A-REITs?
Diversification is a key principal in invest-
ing. Fortunately, the A-REIT sector offers
plenty of choice, from office, industrial and
warehousing properties to self-storage,
childcare, hospitals and retail properties
such as shopping centres and convenience
stores. One advantage of investing with a
specialist manager is immediate access to a
diversified portfolio. But time, skills and
money permitting, some investors might
want to take on the task of building their
own diversified portfolio.
TIM SLATTERYQ
What is the investment outlook
for A-REITs?
The outlook is positive. The Australian
economy is currently undergoing a period
of sustained falls in interest rates, both in
terms of bond rates and the official cashrate. This paradigm has improved the
investment case for A-REITs at the expense
of fixed-interest-rate investments. Further-
more, the environment for industrial prop-
erty is strong, given the growth in demand
for warehouse space from online retailing,
while office markets across the country
are benefiting from tight vacancy.
WINSTON SAMMUTQ
What are the main pros and cons
of A-REITs?
Overall, A-REITs offer a number of com-
pelling factors for investors, including the
advantage of enhanced transparency and
liquidity due to being listed on the ASX.
Ultimately, they provide the opportunity
for investors to gain exposure to large
commercial property assets with a low
capital outlay and low transaction costs.
As an A-REIT investor, you are likely to
a hold a minority position and will be una-
ble to influence operations of the trust or
underlying properties. In contrast, if an
investor owned real estate directly they
could make their own asset and capital
management decisions.
STUART CARTLEDGEQ
Are there any fees or tax
considerations when investing
in A-REITs?
Investors should understand the level of
costs associated with an A-REIT. In the
case of an externally managed vehicle, this
may be in the form of funds management
and transaction fees. In the case of an inter-
nally managed vehicle, investors should
assess the level of corporate costs.
A-REITs hold their passive property
assets through a trust structure. The trust
structure allows the net income to be
passed through to investors on a pre-tax
basis. The distributions of some A-REITs
contain a component of tax-deferred or
franked income, which has the potential
to increase after-tax investor returns.
STUART CARTLEDGEQ
Why would I invest in an A-REIT?
A-REITs have historically offered a
moderate correlation with other asset
classes, which can improve risk-and-return
characteristics in a diversified portfolio.
A-REITs offer investors the opportunity to
gain exposure to some of the best property
assets in Australia. Examples of iconic