Accrual accounting - Revenue and expenses are recorded as they are earned, regardless of whether cash has been paid or received.
Acquisition cost – costs of acquiring an asset which includes the purchase price plus other costs required to ready the asset for use including stamp duty payable and any other expenses incurred by the purchaser (eg. Due diligence costs).
AFV – assessed fair value is the net present value of 5 years cash flow discontinued to establish PIR’s fair value.
Alpha – value added from active management over passive investing.
Amortization Period – the period of time a loan is calculated over (and repaid).
Ancillary tenant – a tenant not core to operations, for example that rents a space on a building’s roof one or upper level for signage or communications.
ASIC – the Australian securities and investment commission. ASIC enforces and regulates company and financial services laws to protect consumers, investors and creditors.
Ask – the lowest price at which a market participant is whilling to sell their securities for.
ASX - Australian stock exchange.
Basic Points - one basis points in 1/100th of 1 percent is equal to 100 basis points. Generally used to define differences in yield.
BBSY (Bank Bill Swap Bid Rate) – a benchmar intrest rate quoted by routers information service. The BBSY is typically used by financial institutions involved in intrest rate swap and related transactions.
Bear Market – a prolonged period of falling security prices.
Benchmark – a standard by which something can be measured or judged. Often used as a synonym for index.
Beta – a measure of assets sensitivity to an underlying index or factor. For example an asset with beta of 1.2 would be expected to return 12 percent if the market returned 10 percent and 12 percent in the market returned 10 percent. Beta is computed as an assets correlation with the index times the ration of the assets standard deviation to the indexes standard deviation.
Bid – the highest price offered to purchase securities in a market.
Bond –An IOU (debt security) issued by a government of corporation that pays a stated rate of interest and return the dace value on the maturity date.
Book Value – the value of an asset as recorded in a company’s books. Representing its cost plus any additions, less depreciation. The book value is often different from the current market value.
Bottom up approach - an investment strategy that emphasizes finding individual companies which are expected to outperform the index return before considering broad economic trends.
BSX – Bendigo stock exchange.
Bulky goods – a retail warehouse type operation such as a large hardware, furniture or white goods store. Generally a standalone unit normally selling bulky brown or white goods to the public.
Bull market – a prolonged period of rising security prices.
Business Park – a building that provides a mix of offices and light industrial premises not normally located in the core CBD of a city.
Capitalization rate – used by valuer as a means of determining market value of a property. Using this method market value will normally be net income from the property divided by the cap rate.
Cash rate – term defined by the reserve bank of Australia (RBA) as the interest rate which banks pay or charge to borrow funds from or lend to other banks on an overnight secured basis. Also known as the interbank overnight rate. The RBA calculates and publishes this cash rate of each day on the basis of data collected directly from the banks. Also to mean the interest rate which financial institutions pay to borrow or charge to lend funds in the money market on an overnight basis?
Cash rate target – a target for the cash rate or overnight rate. Specific by the reserve bank of Australia, it is a tool in monetary policy.
Central business district (CBD) – the major commercial area of a city normally providing offices retail malls arcades and strip shops with central post office and central public transportation hub.
Commercial property – investment property intended for use by all types of retail and wholesale stores office buildings industrial hotels and service establishments. May also refer specifically to office property.
Community center – a shopping center containing a minimum of one disount department store or two supermarkets.
Convexity – in a fixed income security, convexity measures the way duration and price change when interest rates change.
Cum-distribution - entitlement to distribution. Securities are said to trade cumdistribution in the time period in between declerations of the divided and the last day to register for the dividend after which the securities become “ex dividend”. Securities bought in the cum-disitribution (which is the next distribution to be paid) with the price of the securities usually reflecting the amount of the distribution on a time adjusted basis. Securities sold during the cum distribution do not entitle the previous owner to receive the last distribution to the sale.
Depreciation – a method of allocating the cost of a physical asset over its useful life, which represents a loss or write-off in the value of an asset. Caused by deterioration obsolescence, or both. There are levels of depreciation levels when applied can pass on tax advantages to unit holders in the form of tax-advantaged income distributions, set against other related income.
Derivative security – a security such as an option or futures contract whose value is derived from the value of the underlying asset.
Discounted cash flow method (DCF) – a valuation method that for difference in the timing of cash flow, by discounting these cash flows to their present values. The principle is that one dolor today is more valuable than one dolor tomorrow.
Distribution – income emanating from a trust, similar to a dividend from a company.
Distribution reinvestment – a trust may offer its unit holders a DRP facility whereby they can purchase more trust units in lieu of their cash distribution entitlement.
Dividend – represents the income to shareholders of a company. Many of the stapled securities that are a part of the LPT sector pay a dividend for the corporate component and a distribution for the trust component.
DPU – distribution per unit.
DPS - Distribution per security
DRP – distribution reinvestment plan.
Effective rent – rental payment less concessions or inventive offered by the landlord.
Equivalent yield – the income return on the property. If the property has been purchased then this is net of any acquisition costs or impending rent reviews. It is a weighted average of the initial yield and reversionary yield and represents the return a property will produce based upon the timing of the income received. Usual proactive for equivalent yields is to assume rent received annually in arrears and on gross values including prospective purchaser’s costs.
Ex-distribution – the time period on which the buyer of a security is not entitled to an already declared distribution. An investor buying an LPT on the dividend date or afterwards, will not receive the recently declared dividend with the seller retaining the dividend.
Franking credit – used in a dividend imputation system and represent the portion of a dividend to which a company has already paid taxation. Shareholders then include the grossed up amount of the dividend (pre tax) and then have their income tax payable calculated using that grossed up dividend. Franking credits are then used to offset tax payable.
Freehold (or an estate in fee simple) –the highest form of private real estate ownership (although subject to eminent domain) and is for an unlimited duration. An owner can use the land (and improvements attached to the land which to all intents and purposes become part of the land) in any way subject to the usual environmental building zoning use mining and other controls established by local state or federal government.
Funds of funds (property securities fund) – funds which invests in other funds in the same fund family, instead of or in addition to investing directly in equity, fixed income or other types of investments.
Future contracts – a contract that has uniform terms concerning price, quantity and expiration and that obligates the seller to pay the value of the contract to the buyer at a pre-specified date.
GDP (gross domestic product) – is the total value of all goods and services produced within a country in a given time period (usually a calendar year).
Gearing – there are many variation of this ration. PIR calculates it as total interest bearing liabilities divided by the total assets of the LPT. Where possible total interest bearing liabilities and total assets of enteritis owned by the LPT are included, as opposed to the net assets of these entities.
GLA Gross lettable area – is the measure of the total building area of retail and industrial properties.
Ground lease – this is a lease that gives the right of use and occupancy without ownership of land, normally allowing for improvements (such as buildings or fixtures) to be placed in the land,, paid for and provided by the tenant.
Hedge – a strategy used to offset investment risk. In investing, hedging involves the purchase of an offsetting position, such as a put option or futures contract, to guard against the risk of a market decline. Often used as a defensive strategy in portfolios investing in non-domestic securities to reduce negative effects of unfavorable moves in currency exchange rates.
Historical yield – the yield on an investment based on the end of period price, but using distributions or dividends previously paid over the relevant period.
Hi-tech industries – properties containing office space or research and development laboratories that comprise at least 40% of lettable area.
IMF international money fund – an organization of 185 member countries. Among other aims it was established to promote international monetary co-operation, and provide temporary financial assistance to countries. Related to the world bank.
Index (stock index) – is a means of measuring returns from and performance of a portfolio of selected investments. The S & P / ASX200 index, or the S & P /ASX200 property trust accumulation index were created for the ASX, and are designed to act as a proxy for the overall performance of the larger vehicles in the market or sector. In general, indices may be calculated in different ways for example a value weighted index os one in which each stock affects the index in proportion to its market value. The above mentioned indices are value weighted.
Indexing – a passive portfolio management strategy that seeks to match the composition and therefore the performance of a selected market index.
Inflation – a measure of the change in the general level of prices. A proxy is generally taken to be the change in the consumer price index.
Inflation target – preferred range for th rate of inflation. It’s a guidance tool for monetary policy. Australia’s inflation target is between 2% - 3%.
Initial yield – the annualized property income expressed as a percentage of the property value.
Internal rate of return (IRR) – the discount rate at which the net present value of an investment is equal to zero. This represents the total rate of return generated by an investment over its life or given timescale, taking into account sale and purchase prices and all cash flows associated with the holding.
Initial public offering (IPO) – a company’s first offering of securities to the public under a prospector PSD.
Lease – a grant of the possession of property to last for a fixed or ascertainable period and usually with the reservation of a rent.
Leasehold – a right to possession and use of land for a fixed and limited period of time. The lease agreement creates this right.
Leased property trust (LPT) – listed property trust. A property trust that is listed on the ASX.
Major regional center – a shopping center incorporating at least one department store, one supermarket, one mini-major and 150 specialties. Has a GLA > 50,000 sqm.
Market capitalization – the value of an LPT as reflected in its stock market price. It is calculated as current price multiplied by units on issue.
Market price – the price actually paid for a property. It differs from market value in that it is an accomplished fact, whereas market value remains an estimate until provided. For LPTs, iit can also refer to the most recent trading price on the ASX.
Market rent – the rental that would apply to a property if space were offered on the open market.
Market value – the highest price estimated in terms of money that a property will bring if exposed or sold in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses it currently has as well as potential uses and assumes a willing buyer and willing seller.
Mean reversion – the notion that asset value revert to an average value or to an equilibrium value. Thus if an assets price is above its equilibrium value the presumption of mean reversion it that the assets price will eventually decline to its equilibrium value. Similarly if the price is below its equilibrium value the presumption is that the assets price will eventually rise to its equilibrium value.
MER - Management expense ration is the amount of fees charged by the manager divided by the total assets of the trust. This generally includes all ongoing fees. Such as fund management fees, trustee fees and custody fees.
Mini major – a retailer with a large national chain that occupies a smaller NLA than the major stores eg. Rebel sport, sanity, autobarn.
Moving annual turnover (MAT) – gross sales for all contributing retailers represented in a shopping center over a progressive 12 month period.
Net asset banking (NAB) – total assets minus total liabilities.
Neighbourhood center – a local shopping center comprising a supermarket and spcialities GLA < 10,000 sqm.
Net absorption – the difference between space leased and space supplied over a set time period.
Net income – income of the trust that is available to be distributed as calculated under the trust deed.
Net rental income – gross rental income less property expenses.
Net lettable area – the floor area of the building upon which a lease can be created and for which rent can be charged. Used to refer to tenancy areas in office buildings and office and business parks. Normally measured from the internal finished surfaces of permananet external walls and permananet internal walls but excluding features such as balconies and verandahs, common use areas, areas less than 1.5m in height, service areas, and public spaces and throughdares.
Net tangible assets – total assets minus total liabilities minus intangible assets.
Non renounceable rights – the holder of the rights does not have the ability to sell on the ASX.
Occupancy costs – rentals paid and other outgoings incurred.
OECD – organization for economic co-operation and development. Organization that represents 30 contries with a commitment to a market economy. Among other aims it seeks to encourage economic growth and financial stability among member countries.
Option- an option in the right either to buy or to sell a specified amount or value of a particular underlying interest at a fixed exercise price by exercising the option before its specified expiration date. An option which gives a right to buy is a call option, and an option which gives a right to sell is a put option.
Passing rent – the actual rent currently being obtained from a property which may or may not reflect market rent.
Passive management – a portfolio management stratergy that seeks to match the composition and therefore the performance of a selected market index. Also refered to as indexing.
PCP – previous corresponding period.
PIR valuation – pir’s estimate of the fair value of a stock. Our valuation is based on a present value calculation of the expected future distributions generated by the individual trust.
Placement – an off-market issue of units to sophisticated investors generally institutions.
Portfolio turnover (velocity) – a measure of the trading activity in a fund’s portfolio of investments that is how often securities are bought and sold by the fund. Also known as velocity.
Power centre – most often anchored by national or regional “category killer” stored. They range between 25,000 sqm and 75,000 sqm and are dominated by large anchor tenants with few, if any in line tenants. They feature value oriented stores, often with bulk products and a “no-frills” atmosphere.
Product disclosure statement (PDS) – a PDS is the offer document that contains information inviting investment in the securities of an ASIC registered investment scheme. A PDS generally contains financial and other information about the company and its operations as well as risk mitigation strategies.
Price to earnings ratio (P/E ratio) – a method of valuing stocks, calculated by dividing the closing price off a company’s stock by its annual earnings per share. Growth stocks tend to have a high P/E ratios compared to income stocks.
Property trust – a property trust is a vehicle for investors to purchase an interest in a portfolio of real-estate assets. Investors in property trusts typically receive regular rental come through distributions and any capital gains on the assets are also passed on to investors through the trust. There are two main types if trust, A real estate investment trust (REIT) which is a pooled investment whose units are listed in the Australian stock exchange. Unlisted property trust on the other hand are note listed on the exchange.
RBA – the reserve bank of Australia is Australia’s central bank.
Redemption – the sale of units by the unit holder in terms of unlisted property trusts refers to the process of selling units back to the trust.
Regional shopping center – a shopping center incorporating at least on major department store a supermarket and >= 100 specialty stores. GLA >=30,000sqm.
Real-estate investment trust (REIT) - a global term for corporation or trust that pools the capital of investors to purchase and manage income generating property (equity REIT) and/or mortgage loans (mortgage REIT). REITs are traded on major exchanges just like stocks. They are also granted special tax considerations.
Refurbishment activity – a refurbishment of part or all of a building usually involving replacement of facades, lifts and other major services and where the space removed from the market for at least six months.
Renounceable rights – the holder of the rights has the ability to sell on the ASX.
Rental income – rents paid by and outgoings recovered from tenants (gross rent has the same meaning.)
Responsible entity (RE) – a public company holding an Australian financial services license who has been authorized by the Australian securities and investment commission to operate a registered managed investment scheme.
Reversionary yield – the anticipated yield to which the initial yield will rise once the rent estimated rental value.
Right of first offer – ROFO has the right to be made an offer before offers from others are considered.
Right of first refusal – ROFR has the right to make an offer, after offers from others are considered.
Right of last offer – ROLO has the right to match the highest offer made to the seller to acquire a property or property interest.
Rights issue – an issue of new shares or units to existing unit holders on a prorate basis. The price paid may be a discounted to current market price. For example a one for their right issue entitles the unit holder to by a unit for ever three helped. Renounceable rights can be traded during the life of the right and non-renounceable rights no not be traded.
Securities – a financial instrument which is a claim over an asset or a future income stream. Examples are bonds and shares.
Scrutisation – the packaging of cash flow producing assets into a marketable security. The process where mortgage backed securities (in the form of bonds) are sold directly into capital markets.
Site coverage ratio – percentage if total site area occupied by the existing building.
Split trust – a trust which offers different classes of units each offering different forms of return. Typically they may consist of growth income or ordinary units.
Split trust – a trust which offers different classes of units, each offering different forms of return. Typically they may consist of growth, income or ordinary units.
Sqm – measurement of square meters or M2
Standard deviation – a commonly used statistical measure of historical volatitily oor risk of a security. The contents of investment returns it measured the extent to which return deviate from the mean (average) return.
Stapled security – when the unitholder owns a unit in the trust and a unit in the attached company, which cannot be separately traded.
Strip shopping center – a shopping center divided into a number of individual units running along a main street, with each shop being entered from the footpath, commonly without commonality of ownership.
Sub-regional center – a shopping center incorporating at least two department stores, two mini-majors two supermarkets and >= 250 specialty stores. GLA > 85,000 sqm.
Switching – the ability to convert units in a split trust into another class of units in the same trust.
Syndicate – a joint venture agreement by a group of investors who pool their funds to purchase and hold a property for a given amount of time. Normally administered by an RE (if registered with ASIC) with ownership vested with an custodian on behalf of investors.
Tax deferred – portion of distribution that are income tax advantaged due to the depreciation of plant and equipment or other allowances, such as establishment cost, nevertheless the cost base of units for calculation of capital gains must be reduced by the amount of tax deferred income received.
Terminal yield – the capitalization rate applied to an investment’s final year cash flow in order to produce an anticipated sale for discontinued cash flow valuations.
Top-down approach – an approach to investing in which the investor first looks at general trends in the economy and then chooses specific industries and particular companies that will benefit from these broad trends.
Tracking error – the difference between the returns achieved on an index based portfolio of assets and the performance achieved by the index it follows. Tracking error measures the standard deviation of the excess returns of a portfolio of securities compared to its benchmark.
Trust deed – a writing or document signed sealed and delivered setting out the terms of an arrangement.
Trustee – one who beneficially holds property on behalf of another under a trust.
Turnover (velocity) – the number of units n a particular stock traded in the ASX over a period of time. Also used to mean the dollar value of sales at a retail store.
Unit holder or holder – the person for the time being registered under the provisions of the trust deed as the holder o a unit in the trust and includes persons jointly registered.
Unit trust – a pooled investment where a number of investors buy units in a trust which in promoted and managed by a professional investment manager. Each investor owns a unit, or a number of them. The value of which depends on the value of those assets owned by the trust.
Utilized property trust – an investment trust vehicle that may undertake one of more public offers to raise capital (equity and or debt) for the purchase or property and operation of a trust. Life expectancy governed only by mandated 80 year maximum.
Unit holder purchase plan – the upp allows unit holders to purchase a limited number of additional unit in the trust at a discount to the market price.
Vacancy – the part of a property that in not subject to a current lease.
Weighting – the portion of different types of asset classes in a portfolio. If a portfolio has more than the normal or commonly accepted or currently provisioned proportion of a particular asset, it may be referred to as being overweight in that asset.
Wholesale property trust – an unlisted property trust that invites investment from ‘sophisticated’ (non-retail) investors via an excluded offer.
Yield – is expressed as a percentage and it simply the ratio of net income from an asset to value of the asset. In terms of a property trust it can be calculated as distribution by market price multiplied by 100.