Property trusts explained

Professionally managed property trusts, also called funds or syndicates, are an alternative way to invest in property.

Investors buy ‘units’ in an investment property or properties, which are managed by a professional investment manager like Trilogy Funds.

2 minute explanatory video

The initial capital remains invested until the property asset(s) is sold when the trust ends and any net proceeds are distributed among the investors. Throughout the life of the Trust, investors also receive income distributions that are paid at set intervals (e.g. monthly or quarterly).

Investment properties are chosen by the investment manager and bought by the Trust. The investment manager then manages the associated maintenance, administration and rent collection.

The property classification could be commercial, retail, industrial or some other class. Investment managers must provide a Product Disclosure Statement (PDS) with information about the trust, as well as update investors about any significant changes to the trust. In the case of unlisted property trusts, the investment manager is also required to publish ongoing disclosure documents.

Listed versus unlisted property trusts

Listed property trusts are listed on the Australian Securities Exchange (ASX), while unlisted property trusts are not. Withdrawing an investment from a listed trust may be easier than an unlisted property trust. Normally in an unlisted property trust you cannot withdraw your initial capital investment and must wait until the property is sold. The net proceeds are distributed among investors on a pro-rata basis as the return of their capital.

Potential benefits of investing in a property trust

In return for investing in the trust, investors receive distribution income from the property during the life of a trust. However distributions are not guaranteed, nor is the return of initial capital invested.

You may also receive a ‘capital gain’ on your original investment. But this will only occur if the value of the assets in the trust have increased upon sale. If they have decreased, it results in a capital loss.

Like most investments, there is risk associated with the potential reward and it is critical to ensure the investment risk profile suits your personal circumstances. A licensed adviser can help you make this judgement if you are unfamiliar with this investment type.

Please note that Trilogy Funds provides general information only and does not take into account any of your personal circumstances or seek to provide a personal recommendation to you. You are encouraged to seek expert advice before acting on any information contained in our resources.