Commercial property trust / REIT investment using an Exchange Traded Fund (ASX:SLF)

Bombed out commercial real estate courtesy of StephYo on Flickr licensed under Creative CommonsIn the never-ending quest for the unpopular asset class that you might be able to pick up on the cheap it is difficult to go past commercial real estate at the moment.

But there are a few problems:

  1. commercial real estate can be very illiquid
  2. with the gearing in this sector, falling property values, and historically low interest rates that may increase, there may be risk in a particular fund that it is hard to identify

So what might be interesting would be a commercial real estate exchange traded fund that is both liquid and spread across a number of different property trusts.

In Australia you can find exactly this with the State Street Spider S&P/ASX 200 Listed Property Fund (roughly $15 billion market cap with 16 holdings and a .4% management cost with quarterly income distributions).

SLF Net Asset Value has halved over the last year

If your approach to buying stocks is chartist/technical, stop reading here because the chart (ASX:SLF)
 is a bit ugly to look at, with net asset value at 1/2 of its 12 month high, and down 2/3rds over the last 2 years.

SLF ETF fall in net asset value since Aug 08

SLF ETF fall in net asset value since Aug 08

We have started (and intend to continue) buying it in multiple small parcels and as a long term investment.

SLF income picture

SLF is currently trading at a  nominal double digit yield which is estimated to fall to about 8-9% i.e. you can assume that a further fall in income distribution is already factored into the current price.

Roughly 7 out of 10 of the top 10 holdings are trading at single digit PEs and the outlook from analysts for the whole property industry is still gloomy.

Stock-Specific Risk in SLF

It seems strange to talk about stock specific risk with an ETF but as of August 7th Westfield made up 47% of total assets so if you don’t like Westfield don’t buy this (here are the top 10 holdings): 

Issue Name Sector Classification % of Total Assets
Westfield Group Retail Reits 47.09
Stockland Diversified Reits 13.11
Gpt Group Diversified Reits 7.83
Cfs Retail Prop Retail Reits 6.30
Dexus Property Gp Diversified Reits 6.11
Mirvac Group Diversified Reits 5.32
Cmnwlth Prop Offic Office Reits 2.97
Ing Office Fund Office Reits 2.64
Goodman Group Industrial Reits 2.21
Macquarie Office Office Reits 1.91
Macquarie Countryw Retail Reits 1.32
Bunnings Warehouse Industrial Reits 0.99
Abacus Property Gr Diversified Reits 0.66
Ing Industrial Fd Industrial Reits 0.61
Charter Hall Group Diversified Reits 0.58
Astro Japan Proper Diversified Reits 0.35

Here’s the sector breakdown:



Sector % of Total Assets
Retail Reits 54.34
Diversified Reits 34.42
Office Reits 7.51
Industrial Reits 3.73

Like it? Hate the idea? Let us know by commenting below!

Posted under index trackers

This post was written by mike on August 8, 2009

Tags: , ,

3 Comments so far

  1. John McKay August 31, 2010 4:34 pm

    I am curious to know how a SMSF treats SLF (State Street Spider S&P/ASX 200 Listed Property Fund). Is it entered into SMSF software as a Managed Fund or just like a share?

  2. mike September 4, 2010 4:29 pm

    Do you think you get disqualfied from the SMSF club if you admit that your accountant enters the holdings into the tax related software? (-:

    My assumption is that as an ETF you treat it like a normal share though – certainly that’s what I do in say the portfolio tracking stuff I use.

  3. John McKay September 4, 2010 4:36 pm

    I have discovered that it should not be entered as a share but rather as a Unit Trust/Managed fund. The distributions are a accounting pain in the ring compared with accounting for Dividends from shares.

Leave a Comment

Name (required)

Email (required)



More Blog Posts