What Is An Australian Real Estate Investment Trust?

Australian real estate investment trusts (A-REITs) are funds that give individuals the opportunity to invest in large income-producing commercial properties that are usually available only to large institutions. A-REITs include properties that are located in Australia as well as funds open to Australians that invest internationally.^[1]

REITs (pronounced "reetz") in general can be bought and sold like regular stocks or in mutual funds and exchange-traded funds (ETFs). They benefit investors in two ways: they earn income from the properties (essentially, rent payments from the tenants) as well as the possibility of capital appreciation on the buildings.^[1]

REITs usually pay a higher yield than bonds and dividend stocks, which makes them attractive to many investors. Their income can also carry tax advantages, such as deferment.^[2]

REITs own, develop and maintain a wide variety of assets, including shopping centres, offices and commercial buildings, hotels and theme parks, health care facilities and storage facilities. While some REITs specialise in one property type, others own various types of properties, thus providing investors with an additional layer of diversification. Some REITs also invest in mortgages.^[1]

Some REITs are structured as "stapled securities," which are unique to Australia. They give investors ownership in the fund manager or property development company as well as the properties themselves. Investors get one share in the property trust and one share in the fund management company, which are "stapled" together and can't be traded separately.^[1]

Top Australian REITs

Using information from the Australian Securities Exchange (ASX), here are some of the largest and most popular A-REITs as of this writing (15 May 2020).

1. Goodman Group

Based in Sydney, Goodman Group is the largest industrial property manager traded on the ASX and one of the largest in the world.^[3]

The company owns, develops and manages industrial real estate properties in 17 countries, specialising in logistics and industrial facilities, warehouses and commercial parks. It has more than 1,600 customers and 29 offices worldwide.^[4]

2. Scentre Group

Scentre Group owns and operates what it describes as "the pre-eminent living centre (i.e., shopping mall) portfolio in Australia and New Zealand." Its retail real estate portfolio is valued at A$56.0 billion. Its shopping centre portfolio is worth A$38.2 billion and comprises 42 Westfield living centres.^[5]

The company says it "works with the world's leading retail and luxury brands to create a unique shopping and leisure experience" to ensure "that its centres constantly meet the highest expectations of today's retailers and consumers."^[5] Scentre Group was created in 2014 through the demerger of Westfield Group and the subsequent merger of its Australian and New Zealand operations with Westfield Retail Trust.

3. Dexus

Dexus prides itself on investing "only in Australia" and focuses on office properties in central business districts (CBDs). It owns A$16.8 billion of properties and manages another A$17.0 billion on behalf of its third-party partners. It also boasts an A$11.2 billion development pipeline.^[6]

4. GPT Group

GPT (General Property Trust) Group is one of Australia's largest diversified property managers, with a A$25.3 billion portfolio of retail, office and logistics properties across Australia. GPT says it is the oldest publicly traded property trust in the country, having been listed on the ASX since 1971.^[7]

5. Vicinity Centres

Vicinity says it is the second-largest publicly traded manager of retail property in Australia, with a portfolio of 64 shopping centres valued at A$26 billion. It also manages 32 properties for its strategic partners, 28 of which it co-owns.^[8]

6. Stockland

Stockland is one of Australia's largest and oldest diversified property companies, dating to 1952. Its portfolio includes retail town centres, workplace and logistics facilities, residential communities and retirement villages.^[9]

7. Shopping Centres Australasia (ASX:SCP)

Shopping Centres Australasia (SCA) Property Group owns a diversified portfolio of 91 shopping centres that was valued at A$3.2 billion at the end of 2019. The company focuses on convenience stores and supermarkets. Many of its properties benefit from long-term leases from anchor tenants Woolworths Group and Wesfarmers, two of Australia's largest retailers by sales revenue and number of stores.^[10]

8. National Storage

National Storage is one of Australasia's largest providers of self-storage facilities, with more than 170 buildings across Australia and New Zealand. The company was created in December 2000 as the result of the merger of Stowaway Self-Storage, National Mini Storage and Premier Self-Storage. In December 2013 it formed National Storage REIT (NSR), the first independent owner and operator of self-storage centres in Australia to be listed on ASX.^[11]

9. Hotel Property Investments

HPI owns a portfolio of hotels, pubs and other properties. The company says about 93% of its income is earned from the pubs, which are leased to Queensland Venue Company and Australian Leisure & Hospitality. The rest comes from "speciality tenants," which include a variety of franchisors and franchisees such as 7-Eleven and Subway.^[12]

10. Centuria Capital Group

Centuria Capital Group manages a portfolio of A$7.3 billion in assets, mainly commercial, industrial and healthcare properties. The company's business includes both listed and unlisted property funds, which comprise 130 properties as well as investment bonds through its Centuria Life unit.^[13] Centuria has two listed property funds, both of which are members of the S&P/ASX 300 index.^[14]

Centuria Industrial REIT (CIP) says it is Australia's largest listed domestic pure play industrial REIT. It owns 48 industrial real estate properties valued at A$1.6 billion located in major metropolitan areas throughout Australia.^[15]

Centuria Office REIT (COF) is Australia's largest ASX-listed pure play office REIT, with a portfolio valued at A$2.1 billion. These properties are located in major office markets around the country.^[16]

11. Mirvac

Mirvac owns and manages office, retail and industrial properties valued at over A$18 billion. Its properties are mainly located in Sydney, Melbourne, Brisbane and Perth.^[17]

12. Charter Hall

The company owns and manages more than 1,100 properties, including industrial properties, retail stores, office buildings and early learning centres.^[18]

13. APN Convenience Retail

APN Convenience Retail owns a portfolio of 73 service stations and convenience stores located mainly on the country's east coast. The portfolio is valued at A$394.8 million.^[19]

14. Vanguard Australian Property Securities Index ETF (VAP)

This isn't a REIT itself but an ETF that tracks the return of the S&P/ASX 300 A-REIT Index. As of 30 April 2020 it held investments in 31 REITs with a median market cap of A$8.8 billion. Its top 10 holdings, which made up 81% of its portfolio, include all of the REITs listed above.^[20]

Summary

Australian real estate investment trusts (A-REITs) are diversified funds that invest in large income-producing commercial properties, such as shopping centres, commercial buildings, hotels, and health care and storage facilities, mainly in Australia and New Zealand. Investors seek to earn rental income from the properties as well as any capital appreciation in the assets. REITs usually pay a higher yield than bonds and dividend stocks, and they also carry tax advantages.