A-REITs (Australian real estate investment trusts) give investors access to property assets.
The major benefit of A-REITs is that they can provide access to assets that may be otherwise out of reach for individual investors, such as large-scale commercial properties. A-REITs may appeal to investors looking to diversify their portfolio into property with potential to receive a regular and consistent income stream.
A-REITs are designed to generate wealth in two ways: they provide exposure to the value of the real estate assets that the trust owns and the accompanying capital growth, as well as rental income.
The fund manager selects the investment properties and is responsible for all administration, improvements, maintenance and rental.
While each A-REIT will have its own of characteristics, the properties selected are usually diversified across regions, lease lengths and tenant types. Some A-REITs specialise in particular sectors, and usually fall into one of the following categories:
- Industrial trusts invest in warehouses, factories, and industrial parks
- Office trusts include medium- to large- scale office buildings in and around major cities
- Hotel and leisure trusts invest in hotels, cinemas and theme parks
- Retail trusts invest in shopping centres and similar assets
- Diversified trusts invest in a mixture of industrial, offices, hotels and retail property.
Some trusts adopt hybrid structures called ‘stapled securities’ funds.
Stapled securities A-REITs provide investors with exposure to a funds management and/or a property development company, as well as a real estate portfolio. A share in a stapled securities fund usually consists of one trust unit and one share in the funds management company. These securities are ‘stapled’ and cannot be traded separately. The trust holds the portfolio of assets, while the related company carries out the fund’s management functions and/or manages any development opportunities.
Investing in stapled securities can have tax implications for investors. You should seek your own taxation advice.