Listed Property Trust and Unlisted Property Trust

Listed Property Trust (LPT): Quite easily traded/sold if cash is needed within a few days.
Unlisted Property Trust (UPT): Not so quickly traded to obtain cash, compared to LPT.

1. Apart from the above two points, what are the pros and cons of investing in Listed vs Unlisted Property Trusts?
2. There are ETFs for LPT. Do UPT invest in ETFs for properties?
3. How would a potential investor determine what level of gearing ratio (in particular with UPT) is reasonably safe for the ULP?
4. Would it be prudent to invest approx. similar proportions in LPT and UPT for a balanced “property” (non-residential) investment?

  1. Apart from liquidity (very different), unlisted property trusts (UPTs) usually pay a higher yield and trade on lower multiples. Unlisted property trusts are often single asset, whereas most listed property trusts (LPTs) tend to be multi-asset;
  2. No;
  3. Typically, gearing shouldn’t be higher than 50%. Interest cover ratios are sometimes a better guide. In the GFC, the listed property sector got into diabolical trouble due to high levels of gearing (it was the worst performing sector on the ASX). Post the GFC, gearing levels returned to 25% to 40% range – but in the last couple of years, have started to creep up;
  4. LPT and UPTs are just investment vehicles, not investment assets. I see no rational to have a prescribed ratio between the two. Invest in the properties or mix of properties that will give you the best risk-adjusted investment return.

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