7 July 2011

Dear Investor,

Residential Vs Commercial property?

It seems that the majority of property investors are more comfortable investing in residential properties compared to commercial properties. Most investors feel that they are more knowledgeable in the residential sector as more often than not investors have experienced residential purchases first hand. The majority of people would purchase a home to live in before purchasing an investment property. We also like to think that we have some knowledge about the region in which we live and the values of properties that surround us. But if I asked you about the value of the local fish and chip shop where would you start?

Being familiar with residential property does not mean you are ready to jump into the commercial world. The dynamics of the market are very different, prospective investors should make sure that they educate themselves prior to proceeding with a commercial investment. As always, when making an investment decision it is important to ensure that you are investing in the right property for the right reason.

When we invest in residential property we should be looking for a property that appeals to both buyers and tenants. However on the other hand when looking at commercial property it is important to consider properties that will be in high demand from the business community both now and in the future.

When deciding to invest in the commercial market it is important to first decide what type of commercial security you are interested in. There is retail, office, industrial and warehouse, infrastructure, hotels and also special purpose investments such as aged-care and child care facilities. Each of the different commercial categories have different variables that affect their performance and they will perform differently over time.

If you decided on retail property, you would want to consider the outlook for the retail sector and make judgements on the demand for shop fronts and the effect of variables like online shopping. A prospective investor in warehouses would want to consider the demand for storage and the level of imports that are coming into the country. For offices, the rate of job growth would need to be considered. If looking at aged-care facilities Australia's long term demographics, age specific lifestyle factors and government policy for the sector will need to be considered.

Commercial property is valued differently from residential property and the rental yield is a critical factor in determining the overall value. Commercial valuers pay particular attention to the rental income and lease quality attached to the specific property.

Future rental returns are dependent on the lease. As a result, lease arrangements play a central role in commercial property considerations. Standard leases are normally negotiated for 3-5 years with automatic rental increases written into the contract. Renewal terms are normally offered which helps bind good tenants to a property, providing more certainty to the owner. A long term consistent tenant with a long term lease will be worth more than an equal property with an inconsistent short term tenant.

Ultimately, the decision to invest in commercial property should be based on one's financial capacity and personal circumstances, and should be pursued once genuine independent advice is obtained.

The La Trobe Australian Mortgage Fund does not invest directly in property however we do offer investors mortgage investments over retail, office, industrial and warehouse properties on the commercial side as well as residential properties. At La Trobe Financial we feel it is important to diversify your investments over all mortgage sectors. Our Pooled Mortgages option is well spread by state and sector with the breakdowns listed below. By spreading our investments both by sector and state we feel we are lowering the overall risk profile of the portfolio.

Best regards,
Chris Andrews

1 2 3 4

> Home
> About Us
> PDS - Want to invest?
> FAQs
> Subscribe Free
> Independent Ratings
> Mortgage Shopping List

Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

Daryl Hill
0408 566 524
National Relationship Manager
Eren Myers
0409 419 039
Business Development Manager
Hamish Nott
03 8610 2868
Head of Operations
Cheree Cain
03 8610 2810
Operations Manager
Jason Gidman
03 8610 2818
Richard Anstey
03 8610 2809
Helmuth Ewinger
03 8610 2833
Investor Liaison
Tiffany Davies
03 8610 2814
Investor Liaison
Terrie Simpson
02 9238 2065
Luke Kendall
03 8610 2805
Investor Liaison
Peter Polemikos
03 8610 2834
Investor Liaison
Nadia Chriestian
03 8610 2865
Investor Liaison

La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 145 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. The PDS is available on our website www.latrobefinancial.com.au or by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
* The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may achieve lower than expected returns. Past performance is no guarantee of future performance. Investors risk losing some or all of their principal investment.
- Withdrawal rights are subject to liquidity and may be delayed or suspended.
- The award and ratings were given to the Pooled Mortgages Option within the La Trobe Australian Mortgage Fund.
The rating is only one factor to be taken into account in deciding to invest.
1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith. Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product (S), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit www.latrobefinancial.com.au The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
2. Standard and Poor's (4 Stars - Research Rating) "The S&P rating of 4 out of a possible 5 stars indicates that Standard & Poor's has high conviction that the manager will consistently generate risk-adjusted fund returns in excess of its relevant investment objectives and relative to its peers. Ratings are subject to change. To view the latest research information please visit www.standardandpoors.com.au. Ratings issued by Standard & Poor's Information Services (Australia) Pty Ltd AFS Licence No. 258896 are solely statements of opinion and not statements of fact or recommendations to purchase, hold or sell any securities or make any other investment decisions. Research houses receive a fee from La Trobe Financial for rating the product."
3. SQM Research - 4 stars to 4.25 stars - superior, suitable for inclusion on most Approved Product Lists. To view the relevant research information, please visit www.latrobefinancial.com.au This rating will not take into account your, or your clients' objectives, financial situation or needs. It is up to investors to consider whether specific financial products are suitable for your objectives, financial situation or needs. Research houses receive a fee from La Trobe Financial for rating the product.
4. Lipper Leaders Rating Total Return (Score – 5) Lipper Ratings for Total Return reflect funds’ historical return performance relative to peers. The ratings are subject to change every month. The highest 20% of funds in each peer group are named Lipper Leader or a score of 5 for Total Return. Lipper Leader ratings are not intended to predict future results and does not guarantee the accuracy of this information. More information is available at www.lipperweb.com. Thomson Reuters Copyright, All Rights Reserved.