Analysis of Australian Real Estate Investment Trusts

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REITs is a company which owns and manages real estate to earn income. They make use of collected treasuries from both large and small investors to endow in real estates. Typically, REITs purchases and succeeds in the control of the apartment or building such as Pavilion REIT   (The Balance, 2017). In REITs, the advanced the charges of building tenancy and the increased rents would undoubtedly become the most real channel to show the development of revenue. A lot of REITs trade in the listed stock market, non-listed or private REITs are also presented. Equity REITs, hybrid REITs, and mortgage REITs are the main categories of REITs. Equity REITs generate income through the producing of real estate property, and mortgage REITs generate their income through advancing cash to real estate proprietors or devote money in mortgage-backed securities. Conversely, hybrid REITs does both of these to make income (MetaAuthor, 2017). Return on REITs is the combination of the general income payment and capital appreciation. The major income of REITs is rental money received from the real estate which is paid by tenants. Most of their profit-after-tax is distributed to the shareholder in the form of a dividend. (Moskowitz, 2015) . Naturally, REITs are less unstable in comparison to stocks. REITs also provide a large chance for capital appreciation of the view as a stock. REITs constantly carry out expansion programs and property acquisitions to ensure that returns will exceed the costs of financing. Thus, it always ensures a positive return (Research, 2007).

A-REITs- Australian real estate investment trusts, offers a passage for stockholders to property assets. The primary benefits of A-REIT comprise the provision of access to assets that distinct investors such as large-scale commercial assets are unable to provide, they also offer a comprehensive range of property investments that have dependable and consistent profits which warrant that clienteles always have a revenue stream.

To wealth generation, A-REITs does so in two customs which comprise of rental revenue and provision for capital growth as a consequence of the experience of the worth of real estate properties.

The role of the fund manager includes selecting investment property and is in charge of developments, administration, maintenance, and rentals.

Investment fund choice: Abacus property fund

Abacus property fund overview.

Abacus property group was initiated in 1996 and is involved in specialist investment in property in Australia. In 2002, Abacus property first increased entry into the ASX and was included in the annual S&P/ASX 200 index. The company is made up of three corporations that include: Abacus group holdings limited, Abacus storage operations limited and Abacus group projects limited. As a secured entity, the corporation invests into three trusts; Abacus storage property trust, Abacus income trust, and Abacus trust (Abacus Property Group , n.d.).

Abacus takes gain of profit-making chances that pay to long-term total earnings and increases security holder worth. To achieve a greater value of the property, Abacus has developed a strategy to invest in core plus property.

Abacus’s business goal is to offer financiers with cumulative earnings that are consistent that encompasses eyeing for property assets which are capable of the running of development in rental income and asset worth.

The current value of Abacus property.

Currently, Abacus owns several developments that are either under construction or are finished and placed on the market for sale. Examples of such developments include The Eminence in Melbourne, the Eve units found in South Brisbane, Ashfield central in Sidney, luminary property in Melbourne that are under construction and units in Coulson street Erskine Ville.

The Abacus group of companies provides four investment funds that individuals can invest. One of these investment funds is the Abacus storage fund which was closed, and its final security value was at $1.27. The Abacus Wodonga fund is another investment opportunity by the Abacus group, and as at 31st March 2017, all investors in the fund had received their underwritten capital and distributions. Even though the Abacus hospitality fund is closed to new investment, its current security value is at $0.70 and the liquidity flair price totals to 95% of the net asset worth. The Abacus Miller street fund is another Abacus investment opportunity that was wound up in June 2015. Investors who trusted their capital in the Abacus diversified income fund II received their underwritten capital and distributions by 31st March 2017 with the potential of the investment fund to be wound up.

 The diversity of Abacus property.

In its business operations, Abacus property owns a variety of assets including industrial property, storage facilities, offices and retail assets. Through a thorough property selection process for assets, Abacus provides investment opportunities that are deeply rooted in the fundamental basics of real estate. Within the company, the largest contributor to earnings is the rental income derived from property. In the process of investment, Abacus pursues assets that are mispriced within the real estate market of which the business trusts they have the perspective for value-added income and capital progression.

Risk management

Abacus property, being an estate fund experiences some degree of risk of which the company employs an effective strategy to manage. Abacus in its risk mitigation strategy conducts a risk/return assessment with the aim of determining the alleged risk level and adjusted risk return. Profiles of the risk/return evaluation are based on a seven-year investment period of the trust fund. At the end of the assessment, trusts are grouped into medium risk or average return compared to the retail unlisted direct property funds management sector.

Recent Performance and future outlook of specific Vehicle

Listed property values have an advanced price impulsiveness than the confidential property. The listed property prices are quoted in the Australia Stock Exchange just like shares in other states while the unknown property prices are not quoted. The chief drawback of the unlisted property is that they have longer disadvantage phases and therefore are an illiquid investment. The listed property prices change frequently and are trade publicly.

Unlisted Property

Property vehicle overview

In Australia, there is a real estate company called Cromwell Funds Management Limited that possesses, manages and makes reserves in commercial property. The Cromwell Funds Management company belongs to Cromwell Property Group (Group, 2015).

Cromwell sensibly chooses, obtains and manages secure income from commercial property production and portfolios in all parts of Australia. It gains its wealth through this investment.

The company gives proposals to its investors a comprehensive product suite that includes high-quality range, commercial property options, listed and unlisted. Cromwell was established back in nineteen ninety’s, and it has continued to improve up to date.

Portfolio and details of the current value of the property

The key goal of the company trust is to offer to its shareholders a diversified and secure access to reliable income stream with the potential for capital growth. It is suitable for investors in need of a differentiated, high-quality profitmaking property assortment that has strict monthly liquidity. The collection is inclusive of long-term agreements and blue-chip occupants. The company fund provides exposure through Australia either directly or through unlisted property investments. The fund has seven properties located in South Australia, Queen's land, Australian Capital Territory, and Victoria. It delivers diversification throughout these areas. The performance is measured against PCA/IPD Australia Unlisted Retail Property Fund Core Index (Steffen Westermann).  In August two thousand and thirteen is when the fund started. The amount that is available for withdrawal is seven hundred thousand, one hundred and thirty-five dollars.

The seven diverse areas that take the fund's portfolio include:

a. 64 Allara Street Canberra CBD

b. Parafield Retail Street – Main North Road 2601 – Adelaide CBD

c. 19 George Street – 11,13 Robinson Street Melbourne

d. Bunnings Munno Para West - Cnr Curtis Road and Frisby Road 5117 – Adelaide

e. Rand Distribution Center, lot 902 Caribou Drive – Direk South Australia

f. City heart Building – Ipswich City – 117 Brisbane Street

g. Energex House, 33 Breakfast Creek Road, Bowen Hills Queensland

Current Value

Yield 5.7% ( 30 July 2017) and has an open status

7.00 Cents Per Unit $1.298 Unit Price

Property portfolio diversification

The CFM purposes at having an ongoing to expansion to the fund, upsurge diversification by spending in multiple locations throughout Australia, investing in a non-residential property like office, retail goods and industrial, and multiple leasing time frames investments. However, the primary focus of the fund is to invest in non-residential property which does not offer diversification outside the continent.

Accurate vehicle risk management

 CFM primary comprehends the real estate market, stripping and investing at appropriate times in each market and the wider economic cycle, and macroeconomic conditions. It enhances overall investment returns through these ways. The fund maximizes the rental income by purchasing Direct Property or interests in Property Trusts with cash flow. The Cromwell Company has professionals who do the market analyses for the Direct Property investments to benefit them fully.

Recent Performance and future outlook of specific Vehicle

Head Office Location

Abacus property group head office is located at Level 34, Australia Square, 264 - 278 George Street, Sydney NSW 2000

References

Abacus Property Group. (n.d.). Retrieved from Abacus Property Group |: http://www.abacusproperty.com.au/

Group, C. P. (2015). CROMWELL PROPERTY GROUP - ANNUAL REPORT - JUNE 30, 2015.

Research, P. I. (2007). Australian real estate investment trusts review. Australian real estate investment trusts review.

Steffen Westermann, S. J. (n.d.). A Review of Corporate Social Responsibility and Real Estate Investment Trust Studies: An Australian Perspective. A Review of Corporate Social Responsibility and Real Estate Investment Trust Studies: An Australian Perspective, 92-110.

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September 04, 2023
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