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What is an Unlisted Property Trust?
Property has traditionally been a popular investment choice for many investors. Property is usually owned directly (by title) or by a securitised offering (either listed or unlisted). Unlisted property trusts are usually property holdings that have been unitised in a trust structure (where all earnings are paid out to investors).
What is a Listed Property Trust?
A Listed Property Trust (“LPT”) is a pooled investment whose units are listed on The Australian Stock Exchange. The owners of the Trust – unitholders – can trade their units on the exchange in the same way as for any share or other listed security. Investors owning units in the Trust receive benefits from dividends, tax advantages and capital gain in the price of traded units. Professionals who buy, sell and manage property assets with a view to maximising returns for unitholders are called the ‘Responsible Entity’ (or sometimes Manager). Unitholders can trade their units on the exchange in the same way as for any listed security. The ‘LPT index’, a weighted average of unit prices in all Listed Property Trusts, is now the sixth largest index on The Australian Stock Exchange. It represents almost 5% of market capitalisation.
What is the difference between a Listed Property Trust and an Unlisted Property Trust?
Prices for units in a Listed Property Trust are quoted on The Australian Stock Exchange, just like shares in companies such as Telstra, Woolworths and the Commonwealth Bank. Unlisted Property Trusts on the other hand are not listed on an exchange. A major drawback of Unlisted Property Trusts is the standard twelve-month maximum redemption period, making the UPTs an illiquid investment. On the other hand, the LPT unit prices constantly change as units are publicly traded. LPT prices therefore exhibit greater price volatility than those of UPTs.
What are the main benefits of investing in a Listed Property Trust?
Listed Property Trusts provide the opportunity to invest in numerous properties allowing investors to diversify their portfolio by location, size and sector (eg: office, industrial, shops, hotels), for a relatively small initial outlay. They are a ‘unitised’ investment, allowing the buyer to purchase a parcel of units representing a pro-rata entitlement to the dividend income - derived generally from rent from the Trust’s properties. In addition, LPTs are not management intensive for the unitholder because the on-going maintenance and management of the Trust is undertaken by the Responsible Entity. The only decisions required by the investor are the buy/sell decision and voting at general meetings. |
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