Sponsored content
By Per Amundsen, Head of Research, Thinktank
Many investors think there’s only two ways to invest in commercial property – in ASX-listed Australian Real Estate Investment Trusts (AREITs) or direct property funds, also known as unlisted property funds. Although they are the most well-worn approaches to this asset class, there are other options for investors, of which Thinktank’s investment trusts (of which more later) are gaining traction in the market.
But AREITs and direct property funds remain the main game and there are significant differences between these two approaches to property investment that investors need to be cognisant. This list is not exhaustive but it probably covers the key factors – investment amount, liquidity, volatility and income distributions.
AREITs offer a cheaper entry point. Be prepared to stump up at least $2000 to secure an economic parcel of units. For their unlisted cousins, $20,000 is typically the minimum amount.
Prices of AREIT units fluctuate daily. The performance and value of the individual properties will affect the share price but so too will the market sentiment. If Wall Street takes a hammering overnight after a Donald Trump tweet, expect the price of your AREIT units to fall, irrespective of the trust’s fundamentals.
Remember, too, when the market is rising it’s not uncommon for AREITs to trade above their net asset valuation (NTA). Conversely, when the bears are in the ascendency, AREITs can trade below NTA. And the yield obviously depends on the stock’s price, falling as the unit price rises and rising as the unit price drops.