So far YIG has released articles pertaining to Investment properties and AREITS, AREIT Goodman Group. Today we will be breaking down the components of a stapled vehicle. A stapled vehicle is a type of internal management. So why call it stapled? Because the two investment vehicles being a Trust and a company is bound together. The company carries out activities such as funds management, whereas the trusts have its assets.
So how are the company and Trust stapled together? The investment vehicles are stapled together by a stapling agreement. The agreement jointly staples both the company’s shares and the units in the trust fund. There is usually a contractual agreement between the company and the trust to provide asset services. Moreover, the stapling agreement means investors cannot purchase a single trust unit or single share within the company. Instead, investors must buy a stock and a unit together.
The trust still has a responsible entity (RE). A RE manages the operations of the trust structure. Whereas the company has directors that are responsible for providing strategic insight into the company’s future direction.
At the top of the diagram, we have investors. Investors buying and selling stapled vehicles invest in both the shares of the company and Trust units. In turn, investors receive dividends from the company and distributions from the trust.
So why invest in stapled Vehicles?
Firstly, investors can gain tax advantages through the dividends they receive from the company. Second, to that, investors can receive distribution payments through depreciation allowances on the asset. Moreover, stapling incentivizes the company directors to produce high-quality work for unitholders instead of just their shareholders. Lastly, a stapled vehicle allows you to reap the rewards of both investment vehicles (Company and Unlisted Trust). Some Stapled Vehicles that YIG will be analysing in the upcoming months include Mirvac, GBT, and Dexus.
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Written by Thomas He, an associate of YIG.
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.