At FRP Capital, we often speak with clients who are keen to enter the commercial property market but feel locked out by the high capital requirements and the complexities of managing a property directly. Fortunately, listed and unlisted real estate investment structures offer an easier and more accessible pathway to property investment. They provide exposure to high-quality assets with a lower capital outlay, expert management, diversified portfolios, and consistent income potential.

Listed and unlisted real estate investment trusts give investors the ability to access a portion of a commercial property asset or a commercial property portfolio. These investments pool funds from multiple investors to acquire commercial properties such as shopping centres, offices, industrial facilities, and healthcare centres.

In Australia, these trusts fall broadly into two categories:

• Listed A-REITs (commonly known as A-REITs) which are traded on the ASX
• Unlisted property trusts, which are not publicly traded and typically structured with either open or fixed investment terms

Similarities of Listed and Unlisted Property Funds

While listed and unlisted property funds differ in structure and liquidity, they operate and generate returns for investors in a similar way.

In both cases, investors contribute capital to gain exposure to income-generating property assets, with ownership represented through units (in unlisted funds) or securities (in listed funds).

Each fund is overseen by a professional manager, such as FRP Capital, who is responsible for identifying suitable properties, managing the fund's day-to-day operations, and driving asset performance through leasing, maintenance and strategic improvements.

In return, investors typically benefit from two sources of return:

• Regular income distributions: Paid monthly or quarterly for unlisted funds, and usually twice a year for listed funds.
• Potential capital growth: For listed funds, this is realised through an increase in the market value of the securities. For unlisted funds, it’s derived from the fund’s share of any capital gains achieved when the property is sold.

Listed A-REITs: Accessible, Liquid, and Market-Driven

A-REITs are listed securities that function like shares. They provide exposure to diversified property portfolios and can be bought or sold on the ASX with ease, making them an appealing entry point for everyday investors.

Why investors choose Listed A-REITs:

• Easy to access: Entry from as little as $1,000, with trades executed through an online broker
• High liquidity: Units are traded daily, offering flexibility to enter or exit
• Regular income: Distributions typically paid quarterly, derived from rental income
• Portfolio diversification: Investors benefit from exposure to multiple assets, tenants, and locations

That said, because they are traded on the stock market, listed A-REITs are subject to broader market fluctuations. Price movements may not always reflect the underlying property value, and can be influenced by investor sentiment or macroeconomic factors.

Unlisted Property Trusts: Targeted, Stable, and Long-Term

Unlisted property trusts provide access to direct commercial property without being listed on the stock exchange. These funds are often structured for long-term performance and stability, appealing to investors who value consistency over liquidity.

Unlisted trusts can be either:

• Open-ended, accepting new capital regularly, or
• Closed-ended, with a fixed pool of investors and a set investment term (often 5-6 years)

Why investors choose Unlisted Property Trusts:

• Consistent returns: Income from long-term leases, often at higher yields than listed A-REITs
• Reduced volatility: These funds typically value their assets on a regular basis (quarterly or bi-annually) using independent third-party appraisers. As a result, valuations tend to reflect the true value of the underlying property, which can lead to more stable returns. Since these funds are not impacted by daily market sentiment, they offer less volatility compared to REITs.
• Strategic focus: Funds may specialise in sectors like shopping centres, large format retail, logistics, healthcare or regional hubs
• Tax efficiency: Potential for depreciation benefits and capital gains tax discounts
• More control: Especially in closed-ended structures, investors can select the exact fund and exposure they prefer

At FRP Capital, our unlisted trusts are designed for stability and income, with recent offerings targeting annual yields of 6-7%, distributed monthly. Additionally, they provide potential for substantial capital growth which is realised at the close of the Fund.

Key Comparison at a Glance

Making the right choice: Aligning Investments with Your Financial Goals

Choosing between listed and unlisted real estate investments depends on your financial goals, risk tolerance, and investment horizon.

If you seek stable income, tax benefits, and are willing to commit for the long term, unlisted investments like FRP Investment Trusts could be more suitable.

If you prefer liquidity, lower entry points, and are comfortable with market-linked performance listed A-REITs might align better with your investment strategy.

Always consult with a financial advisor to ensure your investments match your personal situation and financial goals.