An Australian Real Estate Investment Trust (A-REIT) is a unitised portfolio of property assets, similar to stocks and trade, listed on the Australian Stock Exchange (ASX). A REIT is a diversified and professionally managed portfolio of real estate assets that enables investors to access a property portfolio which may include commercial, industrial, retail or a mix of these real estate assets which would not otherwise be available to the individual investor. Investors invest in REITs mainly for two reasons - higher income and long-term growth. REITs also help investors diversify their income streams, as they are an alternative to direct property investment and can be used to provide portfolio diversification. This type of investment allows large and small investors to own a share of real estate.
For example, X company, as a premium property group on CrowdfundUP, qualifies as a REIT. It purchases an office building and rents out office space with the funds generated from investors. X Company own and manages this real estate property and collects rent every month from its tenants. Thus, X company is considered an equity REIT.
On the other hand, assume Company Z qualifies as a REIT and loans out money to a real estate developer. Unlike Company X, Company Y generates income from the interest earned on the loans. Therefore, Company Y is a mortgage REIT.
There are 5 types of REIT's - with the main 3 being equity REITs, mortgage REITs, and hybrid REITs. In this blog post, we’ll discuss these REITs in detail.
Some trusts adopt hybrid structures called ‘stapled securities’ funds. Stapled securities A-REITs provide investors with exposure to a funds management and/or a property development company, as well as a real estate portfolio.