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: , ,

Long term recession or ‘are we anywhere near the bottom’?

With the problems at Merrill Lynch, AIG, and collapse of Lehmans, there will be some people who have been sitting on the sidelines in cash who may think this is a bleak enough moment to start dribbling cash into the market.

This is not one of those ‘on the one hand & on the other hand’ articles in that I spent 10% of my SMSF cash holdings today on buying 3 (fairly poorly researched) index trackers, but as someone noted to me this evening it is easy to want to get back in too quickly (the possibly apocryphal example given was that of JP Morgan who waited from 1929 to 1939 to start buying again).

The same person noted that that ASX index had now fallen from 6800 to 4799 but that the next support level was at 4200 (confession: I neither believe in or understand charting in anything but a rudimentary sense when it comes to equities).

There was some muttering about if we hit 4200 we would be in for “10 years of poor returns”.

‘Typical bear markets’ fall 25% and that is where we are now in most major markets.

So I went looking today for poor performing markets over the last couple of years where I could start to nibble at low cost index trackers, which had gone on to fall even more after the weekend’s events.

I ended up buying small holdings in 3 iShares trackers that just happen to be in Asia that have not performed very well over the last 5 years and have fallen even further over the last few days (the charts are for the underlying indices and not the tracker):

IJP – (iShares MSCI Japan)
IKO – (iShares MSCI Korea)
ITW – (iShares MSCI Taiwan)

I am even tempted increasingly by the S&P500 which got to 1500 last year and is now sitting 20% lower just below 1200 (back where it was in 1998!) but wonder if there will be another US dollar fall that might be a better entry point given that I am not a US resident (the USD is up 10% against the $A in the last few weeks).

Posted under index trackers, market timing

This post was written by mike on September 16, 2008