Question: What are your thoughts on unlisted property trusts? Are they better value than listed trusts trading above net present value (NPV)?
Answer (By Paul Rickard): Potentially – yes – but it will depend on the property. The major problem with unlisted trusts is the lack of liquidity and getting your money back. You need to understand the manager’s plan to terminate the trust and assess how realistic this plan is.
In regard to buying listed trusts above their NPV, I would be fairly mindful of this, particularly in the current commercial property environment. While listed property trusts have done well this year due to the “thirst for yield”, the commercial property market is arguably in oversupply and the outlook is mixed.