What is an A-REITs?
A-REIT is short for Australian Real Estate Investment Trusts. These REIT’s own a portfolio of properties, ranging from shopping malls, apartment buildings, warehouses to service stations. Examples of an Australian REIT and to watch are Goodman Group (GMG), Scentre Group (SCG), Dexus (DXS), The GPT Group (GPT), Vicinity Centres (VCX), Stockland (SGP) and Mirvac (MGR).
The companies mentioned above are the top performing companies with a diversified portfolio* (this attracts the clients). Smaller companies can not compete at a diversified level (financially) so many choose to only go for one sector, for example Viva Energy Reit Ltd (VVR) they only own service stations with operations across Australia.
Why invest and key tips on A-REITs?
A-REITs hold numerous advantages over investing in property itself. Firstly, shares are very liquid (you can buy and sell them with a tap of a button) but can be more volatile. Another key benefit is that A-REITs provides access to assets that can not be reached by individual investors. A-REITs have proved to be a success in the long term with a 12.8% return (1 year), 14% (3 year) and 50.8% (5 year) (asx.com.au).Their income is generated through the rents and leases of the properties they own; therefore, the steady cash flow of the A-REITs makes it attractive for investors. Further research should be done when you are ready to invest in A-REITs as it is recommended to look for the company’s growth in earnings and revenue. For example, the growth of online shopping (Amazon) led to the booming phenomenon for large scale logistics and warehouses. As you can see in Figure 1 below, GMG has jumped on the logistic wave, secured tenants including Amazon, DHL and Toll Holdings, and their performance rocketed. But on the other hand online shopping has had a negative impact on shopping centre traffic which can be a risk to retailers and/or groups that specialise in shopping centres e.g. JB Hi-Fi and Scentre Group.
Figure 1 (google.com)
*1 they invest in a range of sectors and countries for example GMG is a real estate group that invest in direct and indirect held industrial property, fund management, property services and development management. They operate throughout Australia, New Zealand, Asia, Europe, UK, North America and Brazil. This makes them a very attractive REIT due to their large scale and diversified portfolio.
Yes, it may be worth investing in A-REITs due to their liquidity and long term yields. I would recommend further study on the company you want to invest in and read their half year, yearly, rebalance and operational updates/reports that are posted on their website.
If you want to learn more about A-REITs, I will be posting monthly reports on the market movers. Stay tuned.
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Thomas He , Associate of YIG.