Listed vs. Unlisted Property

Listed property includes REITs and other companies mainly involved in property that are listed on stockmarkets such as Westfield. Unlisted property and mutual and funds that are not stock market listed. The performance of these two types of investments can differ radically. Returns of unlisted property closely match those of direct investments in property while the listed investments fluctuate with the stock market and sometimes fluctuate more than the stock market. So much so, that these are almost two separate asset classes. According to Mercer Australian unlisted property returned 19.5% in the year to 31st March 2008 and 2.3% in the March quarter. On the other hand, the index of Australian REITs (shown above and which is dominated by Westfield) returned -22.8% and -17.8% respectively! Over the last 10 years A-REITs returned 9.8% vs. 12.8% for unlisted property.

We have a mixture of listed and unlisted property. I have 5% of net worth in the TIAA Real Estate Fund in my 403b. Since September 2002 it's averaged 11.1% p.a. with a Sharpe ratio of 3.8! It's only had three marginally losing months. The (unlisted) fund is directly invested in all kinds of property mainly in the US (one property in the UK at Canary Wharf). 13.5% of Snork Maiden's superannuation (Public Sector Superannuation Accumulation Plan) is in unlisted direct property. Besides that we have listed property investments including NCT (a mortgage fund in fact), CIF.AX (UK and global infrastructure) and about 3% of our holding of the Colonial First State Conservative Fund. In total we have 8.2% of net worth in property. The listed investments have been very volatile and erratic.

An article in the Australian Financial Review yesterday highlighted how much A-REITs have fallen recently but still argued that they are overvalued. I started to think about putting some money into them, but after this analysis (and given we already have a little via the CFS Conservative Fund, I'm less sure but may begin to put some of our contributions to Snork Maiden's managed funds into a listed property fund.