Active management: A proactive style of managing assets in terms of dealings with properties, tenants, and lenders. Through this approach we aim to take advantage of opportunities, avoid risks and achieve maximum returns.

Amortisation: The even spreading of income or costs over a specified period. The timing of when income is received or costs are paid can result in an unfair benefit or loss for investors. Amortisation aims to avoid the artificial benefit or loss that could otherwise occur due merely to the timing of a known or contracted transaction.

Anchor tenant: The prime tenant in a shopping centre which is a main attraction to the centre.

Annualised distribution: This shows how much income an investor receives for each unit they own in a fund. We quote an annualised distribution rate to provide consistency and to facilitate comparison. Some funds pay distributions monthly, others quarterly and still others even less frequently. Furthermore, not all months or quarters have the same number of days. We therefore report a distribution on the basis that it will be paid for a year. For example a one cent per unit distribution for the month of June is divided by 30 (being the number of days in the month) then multiplied by 365 (being the number of days in the year) to arrive at an “annualised” distribution rate of 12 cents per unit.

Capital expenditure (Capex): Those items that are significant replacements or additions to properties, as distinguished from expense items that are considered to be recurring items. Capital expenditure does not include general maintenance and repair items. For example the replacement of an air conditioning unit at a property would be an item of capital expenditure. However, the replacement of its fan-belt would not.

Capitalisation rate (Cap rate): Expressed as a percentage, the “cap rate” is used to calculate the value of a property by using its annual recurring income (rent). It represents the rate of return (or yield) an investor requires from the property by a given date. A capitalisation rate is calcuated by dividing market net operating income by the market value of the property.

Development assets: Properties that are, or are intended to be improved by additional building.

Divestment: Sale of a property or asset.

Facilities: Generally this refers to loans facilities being the agreement under which a Fund is able to borrow from a bank.

Gearing (Leverage): Generally is derived as debt divided by assets. We use LVR as this is relevant to the respective Fund.

(Leasing) Incentives: Inducements offered by landlords to attract tenants to lease space. Incentives increase when supply exceeds demand.

Liquidity: The ability of an investment to be converted into cash with little or no loss of capital and minimum delay.

Loan covenant: A term, condition or restriction in a loan agreement. For example, a requirement by a lender that the borrower maintain a certain level of loan to value ratio.

Loan to value ratio (LVR): The proportion of debt compared to total asset value. Consider a home loan: if you borrow $400,000 to buy a $500,000 house you would have an LVR of 80 per cent.

Net tangible assets (NTA): The total assets of the Fund including property, cash, and receivables less total debts or liabilities, less intangibles (e.g. goodwill) as per the financial statements. NTA may include fair value adjustments for financial instruments where such an adjustment is required in the audited financial statements. NTA represents what an investor would receive if a Fund was wound up at that point in time.

Interest rate swaps: In order to reduce interest rate volatility, Funds often fix via invest rate swaps or other mechanisms the interest rates on a substantial proportion of their borrowings. At times when these fixed interest rates are higher than the prevailing market rate of interest, the Funds incur an unrealised loss. At times when they are lower, the Funds receive an unrealised gain. Under accounting regulations, the loss or gain is represented in the NTA.

Occupancy rate: The proportion of lettable space at a property that is occupied by tenants paying rent.

Recapitalisation: Restructuring of a Fund’s balance sheet typically by increasing the amount of equity or reducing the amount of debt via asset sales. The aim is to alter the capital structure of a company in order to improve its stability and ability to earn profits. 

Tax-deferred income: Property Funds and Trusts can typically access tax concessions like depreciation (capital) allowances, and therefore some of the tax associated with the rental income earned by the Fund or Trust is deferred. The tax-deferred component is generally between 0% and 100% of the total income distribution. The tax-deferred portion is passed through to investors, meaning investors do not pay tax on this portion of the income until the investment in the Fund or Trust is sold. The tax-deferred component reduces the cost base and capital gains are calculated on the new cost base.

Unit price: The price for each unit of a managed investment. This is typically calculated by taking the value of the net assets less accrued income plus transaction costs of the managed investment, and then dividing it the by the total number of units issued in the fund. The Unit price may include fair value adjustments on financial instruments. Please see Unit Pricing Policy.

Weighted average lease expiry: The average lease term remaining to expire across all the tenants in a property (or across several properties) weighted according to gross rent of each tenant.

Yield: This refers to the annual income return from an investment. It is calculated by dividing the annualised distribution or income from an investment by the value of that investment. For example, if a property is worth $100 and an investor receives $10 in annual income from it, the yield is 10 per cent.