Listed property trust

[drfuzzy]

I'm interested into parking some cash into a listed property trust, ideally with a good yield and some potential for capital gain. What are your recommendations?

I would like there to be enough liquidity that I can buy and sell within the space of about 12-18 months. I will need the cash for another investment around that timeframe so don't want to lock myself in with a direct commercial property investment.

I am overexposed to Australian residential property and Australian Shares so either Australian or international commercial appeals. A good yield is also a prerequisitite as my portfolio is currently yielding poorly.

I've looked at BWP (Bunnings Trust), URF (not commercial, USA residential), DXS (Aus commercial), 360 Aus trust, WRT (westfield aus) and some others.

An Australian listed fund with assets abroad would also be OK if yield is good, happy to take the currency risk as I think the AUD will fall in the medium term.

Thanks for your help and thoughts.

DrFuzzy

 

[D.T.]

Given the timeframe, considered parking in offset and saving some interest?

 

[The Y-man]

Have a look at their portfolio and consider their location, tenancies (types of tenants, length of lease), strength/experience of management team.

Also consider liquidity - some of the smaller trusts are listed but very thinly traded.

The Y-man

 

[joeExpat]

I like Dexus and have been increasing holding when it dips. Most Australian listed property trusts have been disposing of overseas assets and consolidating in Australia since the GFC. Be wary of any with high debt levels, this is what did some of them in 5 years ago when they couldn't refinance.

 

[Scott No Mates]

I'm interested into parking some cash into a listed property trust, ideally with a good yield and some potential for capital gain....

I am overexposed to Australian residential property and Australian Shares so either Australian or international commercial appeals.

DrFuzzy

REITs are Australian shares.

There are many options out there with Westfield being a good option. Have a look at Cromwell, Goodman, Macquarie etc or some of the smaller trusts as well.

 

[Tillie]

I like Dexus and have been increasing holding when it dips. Most Australian listed property trusts have been disposing of overseas assets and consolidating in Australia since the GFC. Be wary of any with high debt levels, this is what did some of them in 5 years ago when they couldn't refinance.

What gearing ratio would you call high?

 

[Scott No Mates]

For an REIT, anything above 60%.

Why? you want to achieve some return on capital without it all going towards interest and management fees.

 

[Vixs]

If you need access to those funds in the near future parking them in REITs is a roll of the dice. You could very well be one adverse world event/disaster/conflict away from a credit crunch that tanks your asset price and freezes redemptions for years.

 

[Paul@PFI]

Westfield was one of the first and has deconstructed and reconstructed so many times. Now its "hide the losses". Long term investors just hang on...I'm not even sure what they still own in each entity. Even Westfield Sydney cant retain some landmark tenancies.

Woollies (SCP), Bunnings etc are all doing same. Even CBA and other banks are mulling it over. Even Meriton this week said they thinking of a float for residential tenancies trust (Meriton is AUS largest resi landlord). Few if any AUS Govt buildings are owned anymore too. Basic model is straight fwd - Bundle properties into a trust with it earning long term rents. Split it off and watch suckers buy in. Frees cashflow for "core" operations is the mantra. Problem for past ten years is there is an abundance of industrial land and with changes to industry & economy this isnt likely to improve. ie Ford, Toyota and Holden will have a huge amount of land available....So capital growth is questionable esp Melbourne. The attractive yields can be a false lure. Of course the bank happy to pay high rent for its prime locations and to free their cashflow!!

I see many clients with shares and managed funds and REITS. Those with the big gains arent those with REITS. They pay quarterly distributions which include CGT deferred amounts which arent taxed but they affect cost base. Long term I have to say I see few make a capital gain anyway. That is compared to some bluechip shares. eg CBA shares v's a REIT. The industry was hampered post GFC by lack of liquidity - frozen funds even (Centro).

REITS have their own section in the ASX performance tables published in papers. Check fundamentals and drill down using reports into major tenancies and judge each on their tenancies. One concern I see is SCP tracks WOW...Why not just buy WOW ?

Personally I wouldnt touch any USD denominated income. The dollar and US stimulus is too uncertain.

Then you may also consider a ETF like this one which may insulate and smooth your decision. Look at the profile PDF and it takes on a basket of REITS rather than "all in" on one.