Real Estate Investment Alternative REIT

Real Estate Investment Alternative REIT

Real Estate Investment Trusts or REIT can provide potentially high returns for investors seeking to diversify their portfolios, but it isn’t always a straightforward process.

Real Estate Investment Trusts can offer investors a way to get access to the real estate market without having to own physical property. Accrutus Capital will discuss listed and unlisted property trusts, and why you should consider investing in one. We’ll also look at the benefits of the various structures;

  • understanding the different types of property trusts available in Australia
  • considerations for tax implications associated with REIT investments
  • strategies for investors and how to diversify your portfolio
  • example for ‘Convenience Plus’ and unlisted managed trusts as an alternative for diversification.

Real Estate Investment Alternatives

Are an increasingly popular way to invest in the property market. The structure provide investors with access to a range of properties, from residential and commercial buildings to retail centres and industrial warehouses, without having to commit large amounts of capital.

They offer many advantages such as diversification over multiple asset classes, mitigating risk by spreading investment across different locations, and reduced transaction costs due to economies of scale. There is also potential for higher returns compared to traditional forms of property investing due to leveraging the expertise of professional fund managers and the ability to tap into larger deals which would otherwise be difficult for individual investors.

Benefits of Investing in a REIT

• REITs offer investors a range of high-quality real estate classes such as residential, industrial, commercial and shopping centres, by purchasing units in a Trust Fund.

• They are highly liquid and transparent, making them more attractive than traditional forms of property investment.

• Leveraged opportunities from the professional fund and asset managers can help increase returns.

• Regulation by the Regulator provides increased protection ensuring investment compliance and stringent governance and reporting standards.

Understanding the different types of Property Trusts in Australia

A property trust is a pooled investment vehicle that allows investors to invest in a portfolio of income-producing real estate assets. These assets could include offices, shopping centres, hotels, healthcare facilities, etc.

They provide investors with a diversified portfolio, professional management, and consistent income distributions while offering degrees of liquidity dependent if the investment into an unlisted or listed REIT.

An unlisted property trust allows investors to pool their money into a Managed Investment Fund that acquires substantial commercial property assets that they couldn’t buy on their own.

it is important to understand the different types available before making any decisions. These property trusts can be categorized into wholesale, retail, direct tax-deferred, and hybrid trusts, each offering varying benefits that may suit your investment requirements.

Listed Property Trust A-REIT’s are publicly traded on the Australian Securities Exchange (ASX) and can be bought and sold like other publicly traded stocks. Investors can buy and sell shares in REITs, and the prices are determined by market supply and demand.

Unlisted Property Trusts are not publicly traded and are offered by private real estate investment companies, or fund managers to a select group of investors, such as institutional investors or high net worth individuals.

Knowing which type best suits your investment needs can help you maximize returns and limit risk when adding real estate to your portfolio. Consult your accountant when investing to understand the taxation implications.

The Australian financial and tax regulations governing managed investment trusts or schemes can be found on the Australian Securities and Investment Commission’s (ASIC) website. While detailed taxation guidelines can be found on the Australian Taxation Office website.

Strategies for Investing in REITs

Diversification: Investing in REITs allows investors to spread their risks across various property sectors and geographical locations, reducing the impact of a downturn in any specific sector or area.

Income: Invest in REITs that provide consistently high dividend yields, helping to supplement other income sources and could serve as a hedge against inflation.

Growth Prospects: Identify REITs with strong growth prospects by assessing the quality and potential of their underlying assets, as well as the capability of the management team.

Taxation Benefits: Consider the tax advantages associated with REITs, such as tax-deferred distributions and the ability to claim deductions for property expenses and borrowing costs [3].

Considerations for Investing in REITs for tax benefits in Australia

  • Understand the tax treatment of REITs

A-REITs are generally taxed as trusts, meaning they are required to distribute at least 90% of their taxable income to investors. This income is taxed in the hands of investors at their marginal tax rate, which could be lower than the company tax rate paid by direct property investors.

Additionally, investors can claim deductions for expenses related to their investment in the property trust, such as management fees and borrowing costs.

  • Consider investing in tax-effective structures

Investors can invest through tax-effective structures such as self-managed super funds (SMSFs) and family trusts. SMSFs offer significant tax benefits, such as concessional tax rates on investment earnings and access to franking credits. Family trusts can also provide tax advantages by allowing income distributions to be split among family members, potentially reducing the overall tax liability.

  • Evaluate the tax implications of different types of REITs

Investors should consider the tax implications of investing in different types of property trusts. Some may focus on properties that generate tax losses, which can be offset against other income to reduce the overall tax liability. However, investors should be careful to avoid investing solely to generate tax losses, as this may be viewed as a tax avoidance scheme.

  • Assess the investment strategy of the Trust

Investors should carefully evaluate the investment strategy of the property trust to ensure it aligns with their investment goals and risk tolerance. Some may focus on specific property types, such as retail or industrial, while others may have a more diversified portfolio. Additionally, investors should consider the geographic diversification of the assets and its exposure to different markets.

  • Monitor the performance of the Trust

Investors should regularly monitor the performance of the REIT to ensure it continues to meet its investment goals and objectives. Key metrics to consider include the distribution yield, Funds from Operations (FFO), price-to-FFO ratio, occupancy rates, and rental growth. Additionally, investors should be aware of any changes in tax legislation that may affect the tax treatment of their investment.

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How investors can diversify their portfolio into ‘Convenience Plus’ asset classes

FRP Capital, a leading investment and asset manager specializing in convenience-based shopping centres around Australia, is located in highly valuable urban locations, such as close to transport hubs, universities, industrial and commercial precincts or entertainment complexes. Offer an excellent showcase of an unlisted portfolio. Their latest offering is 4.9klm from Adelaide’s CBD. This highlights the experience, and knowledge of the management team by acquiring quality assets offering strong occupancy of 96%.

FRP Capital acquires off-market properties that provide high levels of rental income while also offering the opportunity for capital growth and tax benefits over the longer term.

Unlisted Real Estate Investment Trusts

As an asset class, unlisted property delivered total 12-month returns of 17.7 per cent in FY22, outperforming direct and listed property, Australian and global equities, fixed income and cash returns. Importantly, this outperformance stacks up over a five-year period, with unlisted property producing a five-year annualised return of 16.6 per cent. (Source: Livewire – Property).

A recent acquisition into the FRP Capital Managed Trust Fund portfolio is the former brickworks factory converted in 2015 into a thriving retail destination. This acquisition demonstrates the importance of expert asset management and the ability to identify and capitalize on unique investment opportunities. More information about the Brickworks Marketplace Shopping Ctr here.

Brickworks Marketplace Fund offers investors high yields and tax-efficient distributions. As an unlisted, Trust is required to distribute at least 90% of its taxable income as dividends to investors, providing a tax-efficient investment vehicle. The trust has also provided investors with attractive dividend yields over the years, with an average distribution yield of 6.07% annually.

 

Accrutus Capital, the Corporate Advisory assisting FRP Capital (ACN 643 942 116) (The Investment Manager), is an authorised representative #001283664 of Lantern RE Limited, holder of AFSL Licence #386569.

Accrutus Capital specialises in raising capital from wholesale and sophisticated investors under Section 708 of the Corporations Act 2001.

By reaching out to Accrutus Capital you can gain access to their select portfolio of exclusive investment opportunities in the Australian real estate market.

In conclusion, understanding the alternatives in real estate investment, and implementing the right strategies can lead to fruitful investments with diversified income sources and attractive taxation benefits.

Partnering with an experienced corporate advisors such as Accrutus Capital can further amplify your alternative real estate investment options with unlisted off-market opportunities.

DISCLAIMER

This article is intended for sophisticated and wholesale investors user Section 708(6,8,10) of the Corporations Act 2001. The information provided in this article is of a general nature and should not be relied upon as professional advice. You should seek independent advice tailored to your specific circumstances before making any decisions. Accrutus Capital and FRP Capital do not accept any responsibility for any loss that may arise from reliance on the information contained in this article. We do not give any advice or recommendation.

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Invest in Australia

Invest in Australia

Australia is an attractive location for foreign investors to capitalise on a broad range of business and investment opportunities. The Australian Government welcomes foreign investment, and has an open foreign investment policy, therefore making it safe and secure for foreign investors to migrate, do business and invest in Australia.

Robust Economy   |   Dynamic Industry   |   Innovation Skills   |   Global Ties   |   Strong Foundations

Invest in Australia as a nation that is at the forefront of research and development, education, business and innovation. Our natural resources are limitless which provide vital energy supplies to the world. Medical and technical advancements abound resulting in a high quality of life. This article is designed as a quick introduction to the Business Innovation and Investment  VISA 188 (Subclass) applicants exploring how to invest in Australia.

Why Invest and do Business in Australia?

Australia ranks in the top 5 countries to immigrate and the nation was built on colonial settlement from 1788 with the arrival of the First Fleet of British ships to Sydney, New South Wales. Since then Australia has developed into second and third generation immigrants who have found a home in Australia.

 

  • One-third of all majority foreign-owned businesses operating in Australia are investments from the US, the UK and Japan combined, therefore account for half of the employment among all majority foreign-owned businesses.
  • Almost two-thirds of exports from majority foreign-owned businesses are generated from US, UK and Japanese-owned businesses.
  • Foreign-owned businesses also contribute significantly to Australia’s IVA. Businesses from the US, UK and Japan contribute around 10 per cent (combined) of Australia’s IVA, resulting in 10 per cent of total business assets are held by foreign-owned businesses from the US, the UK, Japan and Switzerland.  (source: Austrade)

How to Invest in Australia?

  • Your migration agent or attorney can work with our business broker to help you gain more knowledge about how to invest in Australia and select your target business
  • Understand the local legal and financial environment particularly the Foreign Investment Review Board (FIRB). Confirm any regulatory approval requirements before you buy a business or invest in Australia
  • Structure your financial situation in advance to ensure an optimal outcome and potentially avoid legal pitfalls
  • Plan for long-term and short-term business funding to prepare for situations outside your control. Because each country has different finance rules and regulations which take time to work through
  • Spread your risk and resources, but most importantly make an informed decision about the sector your planning to invest in Australia
  • Think strategically long-term and have an exit plan in mind. While integration is difficult and time-consuming, it can make the difference between successful and unsuccessful deals

Advantages of Investing in Australia 

Climate

Invest in Australia while enjoying your perfect climate from high temperatures and humidity in the tropical north to temperate Sydney weather to below freezing in the Canberra and Snowy Mountains regions

Quality of Living

Australia’s is rated the 9th highest in the world, according to the 2017 Social Progress Index. Sydney ranks 10th globally. Melbourne 16th and Perth comes in at 22nd according to the Mercer 2017 Quality of Living Rankings.

Tourism

Almost 279,000 businesses across sectors such as accommodation, cafes, restaurants and takeaway food services, retail and transport. According to the latest statistics available (as at 30 June 2016). The industry employes around 890,000 people and the total Australian workforce for 2016-17, consequently increasing from 4% to around 924,600. Australia experienced record inbound tourism in 2016-2017 driven by strong growth from China, Malaysia, Hong Kong

Economic System

The financial, regulatory, legal, political and economic systems are well established and provide security to Investor Stream applicants looking to invest in Australia

Ageing Population

Australia’s (baby boomer) population is fueling the development sector in aged care and health services. Baby boomers are typically healthier and wealthier than their parents, thereby living longer and re-defining the housing market

Internal Migration

Internal and external immigration stimulates the housing and building economy.  Therefore, immigration has an enormous role to play in the Australian property market. About 55% of our massive population growth is made up of migrants from overseas

Major infrastructure

Spend by governments and private partnerships benefit growth planned around Australia. For example, Nowra and Western Sydney north rail link in NSW. The rail upgrade and duplication in Victoria. The Bruce highway and Beerburrum rail, and Cunningham Highway upgrades in QLD to name a few

Trade

Australia’s easy access via sea and air is a major factor for import and export services especially, in the Asian region. Hence, two-way trade in 2016 was A$673 billion, which made up 40% of our GDP. Nine of Australia’s 12 largest markets have a total trade of A$373 billion are within the Asian region

Business Innovation and Investment VISA
(Subclass 188)

Visa applicants working with their respective migration agents and seeking nomination by an Australian State or Territory government must lodge an Expression of Interest (EOI) through the SkillSelect system. This article ‘Invest in Australia‘ is written as a guide for those applicants considering migrating to Australia through the ‘Business Innovation and Investment Visa 188 (subclass)
Invest in Australia

188 VISA allows you to

  • invest in Australia through establishing a new or develop an existing business or
  • make a designated investment with an Australian state or territory government or
  • participate in a complying entrepreneurial activity in Australia
  • make and maintain a complying investment in Australia or
  • travel in and out of Australia for the life of your visa
  • bring members of your family unit with you to Australia
  • seek permanent residence by applying for a Business Innovation and Investment (Permanent) visa (subclass 888)

Invest in Australia FIRB approval for

  • Foreign government investors
  • Agribusiness
  • Media sector
  • Land rich entities

Invest in Australia – QUICK FACTS

  • The visa is valid for four years and three months from the date it is granted.
  • Applicants for a subclass 188 visa in any stream prior to 1 July 2015, may apply for a subclass 888 permanent visa after 3 years and 11 months.
  • Possible extension stream if you hold this visa under the Business Innovation stream or the Significant Investor stream to meet criteria.
  • If you hold this visa under the Investor stream or Premium Investor stream, you cannot apply for an extension stream under this visa.
  • Business Innovation stream provisional visa holders can apply for one extension up to six years.
  • Significant Investor stream provisional visa holders can apply for up to two extensions to eight years.
  • Each extension stream lets you stay and invest in Australia for another two years.
Doing business in Australia

Australian Investor Obligations

Foreign Investment Review Board (FIRB)

The Australian Government expects all entities seeking to invest in Australia to maintain the highest standards of corporate behaviour. Irrespective of whether those entities are Australian or foreign owned. Persons wanting to invest in Australia or involved in operating these entities are expected to understand Australia’s regulatory environment and abide by all the relevant requirements. Foreign investors should be aware of their obligations outlined in the link below. These requirements are ongoing and may change from time to time. Accordingly, investors are expected to keep themselves up to date with the FIRB and changes to their obligations that may occur.

Property

  • Australia has seen a strong population growth which will continue to underpin the property markets. Last year, Australia’s population grew by 389,100 people to reach 24.5 million by the end of March 2017
  • Invest in Australia for housing which has averaged approximately 164,000 dwellings over the last 5 years. The demand will continue to 2021, therefore continuing strong population growth (underpinned by net migration of 240,000 per anum)
  • Household and demographic shifts in composition (more one and two-person households), means Australia is likely to grow by 172,000 households a year, resulting in a 5% increase in demand

Health and Aged Care

  • Invest in Australia $20 billion aged care sector, which employs over 224,000 staff across more than 1,800 businesses. Caring for over 270,000 elderly and disabled Australians across the country
  • Australian baby boomer generation is reaching saturation point the aged care sector is the fastest growing market in this country.
  • This baby boomer demographic born between 1946-1965 is estimated to be 5.5 million in 2017
  • Baby boomers are set to change the healthcare industry and the provision of aged care in the years ahead

Telecommunications

  • Invest in Australia with a record of groundbreaking innovations. Most noteworthy technologically connected workforce facilitating our highly educated, multi-cultural and multilingual society
  • A vibrant telecommunications industry lies at the heart of furthering the digital imperative for Australia’s future generations
  • Per capita, Australian is the 3rd largest connected country with access
  • Connected households with internet access currently about 86.1% and mobile broadband subscriptions are 132.5 per 100 inhabitants

Why Invest in Australia?

The economy has outperformed other countries for more than two decades, as a result is achieving great success in global markets. The full report can be found here ‘Why AustraliaBENCHMARK REPORT 2018 from the Australian Trade and Investment Commission (Austrade)

Robust economy

The Australian economy is forecast to be the 13th largest in the world and the fifth largest in the Asian region in 2018, despite the fact the country is home to only 0.3 per cent of the world’s population. Australia’s nominal GDP is estimated at US$1.5 trillion (A$1.9 trillion) resulting in 1.8 per cent of the global economy. Australia has almost tripled the value of its total production from two decades ago

Why invest in Australia

Dynamic industries

The country is a leading provider of goods and services that are in high demand across the global economy. Australia is a major producer of natural resources, including significant liquefied natural gas reserves. Clean, green agricultural commodities and premium food are coming into production. Operates in sophisticated financial markets, including the world’s sixth largest pool of managed fund assets, and a  noteworthy leading destination for education and tourism

Why invest in Australia industry

Innovation skills

Australia is an ingenious nation that invented the black box, penicillin for civilian use, high-speed WIFI, the cervical cancer vaccine and Google Maps, among other innovations. Invest in Australia entrepreneurship funds and programs on the rise. One of 9 OECD countries that recorded an increase in the number of new businesses between 2013 and 2017. Almost half of all Australian firms are innovation-active, laying the groundwork for future discoveries

Why Invest in Australian Innovation

Global Ties

The dynamic Asian region integration is driving wealth creation and overall economic growth. Of the top 12 export markets in 2016, ten were in the Asian region and all were rated above investment-grade. Their combined value was around A$227 billion, making up more than two-thirds of Australia’s total goods and services export earnings of A$330 billion in 2016

Investment in Australian Goods

Strong Foundations

The country is one of the easiest places in the world to do business, ranking 14th out of 190 economies. It takes around 2.5 days and a minimum of three procedures to start a business. Australia also ranks particularly well for enforcing contracts (3rd globally), getting credit (6th) and dealing with construction permits (6th).

Invest in Australian Business

FOREIGN INVESTMENT INFLOW 

The latest confidence indicator towards Australian housing market remained positive in Q4, although waning compared to previous quarters. NAB’s view for 2018 largely unchanged.

The NAB’s quarterly residential property survey Q1-4 report tracks opinions of around 250 property market experts such as real estate agents, property developers, fund managers and owners.

The share of foreign buyers in Australian housing markets however continued to fall in Q4, dropping to a 6 year low 8.4% in new property markets and a 5-year low 5.5% in the established housing market.

World Investment Report 2018

Foreign direct investment (FDI) inflows to Australia, which more than doubled in 2016, maintained their high level at US$46 billion in 2017.

According to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2018, Australia remained in the top ten global destinations for FDI.

From 2011 to 2017, Australia attracted an annual average of US$47 billion in FDI inflows, compared with an average of US$28 billion over the previous term (2004 to 2010). This represents a growth rate of 70% over the two periods, well above the world average of 24% and developed economies of 12%.

This solid growth has raised Australia’s share of global FDI inflows to 3% in the period of 2011–17 from 2.2% in the previous period. Australia’s economic resilience, strategic business location, increased global trade and investment ties, sound governance and political stability continue to position Australia as an attractive investment destination.

Australia was the eighth largest recipient of FDI inflows in the world in 2017, up from the ninth position in 2016. The total value of Australia’s FDI inflows stood at US$46.4 billion in 2017, marginally down 2.9% from the inflows in 2016. Global FDI inflows fell by 23% in 2017 to US$1.43 trillion from US$1.87 trillion in 2016.    (source: Austrade)

Invest in Australia Further Research

Accrutus Capital has provided this quick summary of important information to help your decision when investing and setting up a business in Australia. More detailed information can be found on these Australian Government portals

  1. Tourism Australia http://www.tourism.australia.com/en
  2. Business Innovation and Investment Visa (subclass188) https://www.homeaffairs.gov.au/Trav/Visa-1/188-
  3. Austrade – Doing business in Australia https://www.austrade.gov.au/international
  4. Foreign Investment Review Board http://firb.gov.au/investment/
  5. Australian Taxation Office https://www.ato.gov.au/
  6. Reserve Bank of Australia https://www.rba.gov.au/
  7. Australian Prudential Regulation Authority https://www.apra.gov.au/ 
  8. Fair Work Ombudsman https://www.fairwork.gov.au/find-help-for/visa-holders-and-migrants
  9. Australian Securities and Investment Commission https://www.asic.gov.au/
  10. Superannuation Guarantee https://www.fairwork.gov.au/find-help-for/visa-holders-and-migrants
  11. Australian Consumer and Competition Act https://www.accc.gov.au/
  12. Australian Privacy Act 1988 https://www.oaic.gov.au/privacy-law/privacy-act/
  13. Trade, import and export https://www.australia.gov.au/information-and-services/business-and-industry/trade-import-and-export
  14. Anti-money laundering and Counter Terrorism Act https://www.oaic.gov.au/privacy-law/other-legislation/anti-money-laundering

DISCLAIMER

The disclaimer covers content, comments, responsibility, links, government and local laws, jurisdiction and communication methods. None of the contents on this website or blog should be construed as any kind of advice or recommendation. Nothing in it should be taken to constitute a statement that is intended to influence a person or persons in making a decision regarding any investment or financial product. This website or blog does not purport to be complete, accurate or contain all information which its users may require to make an informed assessment of whether to invest in any Offer listed through Accrutus Capital Pty Ltd.

Alternative Investment via SME Bonds

Alternative Investment via SME Bonds

Alternative investment offers smart investors an alternative diversifying strategy for both shares and fixed income across various asset classes. When selecting the right mix in your portfolio it is crucial to consider your time to retirement, tolerance for risk, and expected investment returns, investing across borders can also broaden your investment options, however be cautious. 

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ResiBonds for small-scale property projects

ResiBonds for small-scale property projects

ResiBonds property development for small, medium and large-scale, real estate projects such as high-rise, land acquisition and sub-division and townhouse developments in major Australian locations from Brisbane to Perth. Issued by the developer, builder or renovator. For investors ResiBonds property generally deliver higher returns of around 10% ++ per annum or more compared to the low returns investors are getting from bank term deposits. These are short-term investments of between 12 to 36 months. (more…)

Diversify your SMSF portfolio with RESI Bonds

Diversify your SMSF portfolio with RESI Bonds

A new trend for self-managed-super-funds (SMSF) in Australia to grow their portfolio is through alternative capital investments. The baby boomer generation is rapidly reaching retirement age. Hence, there is widespread realization that your SUPER savings will not be sufficient to provide a decent standard of living. As a result, the SMSF industry has seen massive growth over the last 10 years.

Sophisticated investors are seeking SMSF diversify portfolio options rather then keeping large amounts of cash in the bank. Furthermore profiting the banks and not your SUPER account. Because deposit rates are at historical lows, usually turn to property as a safe asset class. (more…)