1202020 UNIT Monash Week 12 Newsletter Property Investment (REITS)

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UNIT MonashWeekly Newsletter

Semester 2 Week 12 2019

Hey ltltFirst Namegtgt

We introduce to you the new look of the UNIT Monash newsletter

We are continually trying to improve on how we can best meet your needs and provide relevant and useful

content for our valued members To ensure this is the case we now include a link at the bottom of the

newsletter for you to provide feedback to us If you want us to cover a topic or want to tell us what you

think we are doing right please fill it out We want to thank you in advance for your contributions

The focus of this newsletter is to introduce you to the real estate asset class and how a student with

limited funds can get a piece of the action

Check out the week 12 newsletter below for the details

WEEKLY INFO WRAP

Introduction to Investing in Real Estate (Real Estate Investment Trusts)

Real estate agent knocks on my door

Real estate agent Hi I am helping owners sell their home and I amhellip

Me Quickly slams door shut and contemplate my inability to afford a home

Overview

Are you thinking of investing in property or owning a home Well for some a direct real estate investment

may be effortless However for many of us it may seem beyond our reach at the moment due to the

expensive and competitive nature of the property market That is where Real Estate Investment Trusts

commonly known as REITs emerge Allow me to enrich you in the world of REITs

Similar to managed funds REITs are an actively managed pool of investorsrsquo money through a portfolio of

real estate assets whether it be residential commercial or industrial In Australia REITs are better known

as A-REITs (Australian Real Estate Investment Trusts) and are traded on the ASX The A-REITs are

usually diversified across various regions and tenant types For example some A-REITs specialise in a

particular sector or multiple sectors An A-REIT might solely invest in shopping centres while another A-

REIT may invest in both offices and industrial buildings)

Benefits

So why do some investors entrust their money with REITs over direct investment

1 REITs generate income through rent and capital growth similar to direct investment but without the

added need to purchase the physical property

2 Investors are provided with more investment opportunities and gain exposure to various sectors of

the property market at a larger scale through a real estate fund manager

3 A-REITs are traded on the ASX and offer high liquidity compared to direct property investments

4 Due to the unique taxation structure the ATO allows A-REITs to pass on tax-deferred distributions

to investors

Risks

There are many more benefits but investors should not overlook the risk profile associated with REITs

and exercise their due diligence on the management team of REITs REITs may borrow at a high cost and

risk default due to inability to make interest repayments or they may have purchased an overvalued

property which subsequently drops in asset value

Scope

Before you jump the gun and include A-REITs into your portfolio different types of A-REITs exist

Equity REITs

Mortgage REITs

Hybrid REITs

Equity REITs are the most common type of A-REIT in the ASX These REITs acquire manage build

renovate and sell real estates They may focus on a particular sector of the market or diversify across

several sectors Equity REITs generate income from rent by leasing offices industries residential

properties or shopping centres

In comparison mortgage REITs adopt a different business model which owns and invest in property

mortgages These REITs generate income through mortgages and mortgage-backed securities that

finance real estates Hence mortgage REITs do not own a title in property

Stapled securities funds are another type of REITs and a form of hybrid REIT structure Some Australian

REITs adopt a stapled securities structure where a company share and a trust unit is ldquostapledrdquo together

so they cannot be bought or sold separately Therefore investors gain exposure to both the share

component (manages and develops the asset) and trust component (owns real estate assets) In this

case the trust includes dividends from the company and distributions from the trust separately in their

income tax return

Need to know

Right so you are still reading this and want to find out more about REITs As mentioned above A-REITs

are traded on the ASX and the three main elements to understanding REITs are

Location of assets

Type of asset

Companyrsquos debt and development prospects relative to the market

Investors should also consider the Weighted Average Lease Expiry (WALE) of commercial REITs The

WALE calculates the average expiry period of the leases within the property The figure shows the stability

of the REIT and indicates the current and future income stream the property provides Ultimately a longer

WALE attracts investors

As a rule of thumb for all other investments and trading readers are also encouraged to dot the Irsquos and

cross the Trsquos when it comes to REITs

Click here for a list of A-REITs in Australia

WEEKLY GLOBAL BREAKDOWN

The benchmark SampPASX200 index finished down 052 per cent on Friday while the broader All

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1202020 UNIT Monash Week 12 Newsletter Property Investment (REITS)

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Ordinaries was down 049 per cent

Every sector was in the red with the consumer staples sector the worst hit down 12 per cent Woolworths

fell 12 per cent and Coles dropped 16 per cent The big banks were all lower with ANZ dropping 07 per

cent NAB down 04 per cent Westpac down 08 per cent and Commonwealth down 06 per cent In the

mining sector BHP dipped 02 per cent but Rio Tinto rose 08 per cent and Fortescue Metals climbed 16

per cent

Chances for a fourth rate cut in November are unlikely following a surprise dip in the unemployment rate

announced on Thursday Therefore Reserve Bank Governor Philip Lowe said at an International

Monetary Fund event in Washington Friday morning not to assume further rate cuts

For the week the market finished up 065 per cent The AUD is buying 6832 US cents from 6783 US

cents on Thursday

Despite a mixed trading week most major indices managed to post modest gains as third-quarter

earnings season kicks off The SampP500 and NASDAQ are up 05 and 04 per cent respectively while the

Dow Jones Industrial Average is down 02 per cent The majority of the gains were recorded on Tuesday

before withdrawing back later in the week Optimism towards positive earnings reports conflicted with

weak economic data as industrial production fell even more in September US retail sales also declined

unexpectedly dropping 03 per cent

The 10-year Treasury note ended the week modestly lower

The Nikkei 225 Stock Average rose 32 per cent over the holiday-shortened trading week For the year to

date the Nikkei 225 is ahead 12 per cent The yen weakened slightly and closed above yen108 per USD on

Friday

Japanrsquos Statistics Bureau data released on Friday showed that the core CPI fell to its lowest level since

April 2017 adding pressure for the Bank of Japan (BoJ) to ease monetary policy Annualised core

inflation which excludes food prices dipped to 03 per cent in September from 05 per cent in August

A Reuters survey of 41 economists which came out prior to the CPI release demonstrated that 85 per

cent believe the BoJrsquos next policy move will be additional stimulus and roughly two-thirds believe the

central bank will act at the October 30-31 policy meeting Haruhiko Kuroda the central bank governor has

affirmed that policymakers are edging closer to expanding stimulus given the economic damage caused

by the prolonged US- China trade war slowdown in global economic growth and the possible impact of

the October 1 consumption tax increase The poll also showed that analysts expect Japanrsquos economy to

contract in the current quarter Prime Minister Shinzo Abe has pledged to take ldquoall possible stepsrdquo to

counter a steep economic slowdown

Stocks in China posted a weekly loss after the countryrsquos third-quarter economic growth missed forecasts

underscoring the protracted toll of the US trade battle and raising the recession risk for the global

economy The benchmark Shanghai Composite Index fell 12 per cent for the week and the large-cap CSI

300 Index declined 11 per cent

Despite the slowdown Chinarsquos 62 per cent year-to-date expansion suggests that Beijing can still hit its

full-year growth target of 60 per cent to 65 per cent Nevertheless the latest quarterrsquos GDP marks

Chinarsquos slowest growth pace since 1992

European equities delivered mixed results primarily due to geopolitical concerns The UK and the

European Union managed to strike a tentative deal regarding Brexit However the good news was

outweighed by concerns that UK Prime Minister Boris Johnson would not be able to convince the

Parliament to accept the deal The pan-European STOXX Europe 600 Index traded in a range and UKrsquos

FTSE 100 Index dropped 1 per cent The German DAX however managed to gain 14 per cent

The British pound jumped during the week as Brexit talks advance However the optimism was short-lived

as Northern Irelandrsquos Democratic Unionist Party said it refuses to support the agreement The

Parliamentary meeting to vote on Brexit occurred on Saturday with the MPs backing a move to delay

approval of the deal reasoning that approval should be withheld until all the necessary legislation required

to implement it had been passed

Questions and Feedback

Questions

As we mentioned in previous emails - we started UNIT Monash with the vision of educating the student

community in investing and trading to one day strive for financial independence

We want to create a new concept of peer-to-peer communications about investing and trading Theres a

lot of value in sharing experiences having opinions and shedding light on new ideas Feel free to get in

contact with us via Facebook if you have any enquiries about investment trading or our upcoming events

Feedback

We consistently strive to improve on how we can best meet your needs and provide relevant and useful

content for you our valued members If you want us to cover a topic or want to tell us what you think we

are doing right please click here to fill out our one-minute feedback form

We want to thank you in advance for your contributions

Regards

UNIT Monash

SPONSORS AND PARTNERS

Disclaimer

The authors of this publication are not qualified to provide financial or investment advice and as such the

content provided should not be construed in this manner All information is intended purely for educational

purposes and is provided for the personal interest of UNIT members The opinions expressed within the

weekly newsletter do not reflect those of UNIT as an organisation its partners or its sponsors

This email was sent to ltltEmail Addressgtgt why did I get this unsubscribe from this list update subscription preferences

University Network of Investing and Trading middot Monash University Wellington Road middot Clayton Victoria 3800 middot Australia

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