The Significance of Fractional Interests in Listed Property Trust Portfolios

Abstract

Fractional interests in commercial property have taken on increased importance as institutional investors seek to manage risk in their property portfolios. By assessing the ownership arrangements of over 8,000 commercial properties, the level of fractional interests in listed property trust (LPT) property portfolios in Australia over 1991–2004 is assessed. Significant increases in the level of fractional interests (both by number and value of properties) have been evident in the last five years; particularly reflecting increased levels of co-owned international property in LPT portfolios and the acquisition of local landmark office and retail properties via fractional interests. Retail and office property in a 50%:50% co-ownership arrangement is the most dominant local fractional interest structure, with international properties more likely to involve more than a 50% fractional interest by the LPT.