Listed Property Trusts

[natmarie73]

Hi everyone,

I was wondering if anyone has invested in Listed Property Trusts or is currently investing in them.

I have a considerable amount of equity available to invest, and am considering allocating a part of this equity to an LPT for a few years until the direct residential property market is more neutrally or positively geared as I have reached my servicability limit. I am hoping for capital growth, but also additional income during this time.

What are people's feelings and/or experiences with LPT's?

Cheers
Nat

P.S - I have been looking into Australian Unity Property fund which apparently has returned 69% last year to December 31st in a mixture of capital growth and income.

 

[austini]

Hi,

Most researchers are urging caution with the LPT sector. Valuatiions are very stretched. The long term returns for LPTs are around 6 - 8% income dist & 2 - 3% capital growth. A lot of the last year or so returns is attributed to mergers and acquisitions along with investors chasing the next big thing.

Also more and more LPTs (and stapled securities) are getting involved in development activities and have significantly increased their debt levels. In general they used to be considered conservative with a focus on rental income but this seems to be changing. Hence I would assume that volatility will increase.

I have noticed in the press as of late that a few development coys are starting to get into trouble due to big increases in materials and labour costs. So any LPTs with exposure to development will no doubt be experiencing increases in margin squeeze.

It will be interesting to see what others have to say.

Good luck - Gordon

 

[keithj]

I agree with everything Gordon said.

Generally speaking, LPT prices are inversely proportional to interest rates. When interest rates go up, LPT prices go down - this maintains the 1-1.5% yield premium over long term 'risk-free' bonds.

Growth in LPTs is usually the same as inflation - most commercial rent agreements have annual CPI increases built in.

Check what the funds 5yr & 10yr average income/growth is - ignore last year's performance (except as a contra indicator ?).

Some LPTs have partially tax-advantaged distributions - you don't pay tax in the income, but reduce the cost base (you pay discounted CGT later, instead of top rate tax now)

Do you invest in a fund (with 2%+ managements costs) or invest directly in LPTs on the ASX.

KJ

 

[plainsong]

I am interested in the replies to Natmarie's query as well. My Finanancial person recommended these as an income investment a few weeks ago, but I am cautious in the current enviroment and really hav'nt had time to do any DD on them at all. The divis are mostly unfranked as well.

The Fin Review had an article on them a couple of weeks ago, but I didnt feel it answered my concerns at all,
Im just looking at the listed LPT's though,