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Key points
- ASX real estate shares can provide exposure to the property market
- Charter Hall Long WALE REIT owns a large portfolio of commercial properties with long rental contracts
- Brickworks is a leader in the building products industry, whilst also owning other assets with growth potential
Financial experts often talk about different asset classes like shares and property. But there are a number of ASX real estate shares out there that might be better options than investing in property.
In other words, the ASX share market can provide exposure to real estate investments so investors can directly or indirectly profit from property.
With that in mind, here are two ideas:
Charter Hall Long WALE REIT (ASX: CLW)
This is a real estate investment trust (REIT) that owns commercial properties. These properties are predominately leased to corporate and government tenants on long-term leases.
The company is invested in a number of core sectors like office, industrial and logistics, and retail.
At the latest count, its portfolio amounts to around 550 properties, with an occupancy rate of more than 98% and a property value of $7 billion. Its weighted average lease expiry (WALE) is more than 12 years, providing substantial income visibility and stability.
It has in-built growth with its rental contracts, providing growth for its rental profit and distributions.
The ASX real estate share is experiencing ongoing valuation growth thanks to the current environment, particularly low interest rates. In its December 2021 update, the business saw an 8.1% rise of property valuations on paper.
This update meant the net tangible assets (NTA) per unit grew 14.4% to $5.85. The current Charter Hall Long WALE REIT share price is around 15% less than the NTA.
Ord Minnett currently rates it as a buy with a price target of $5.46. It's expecting the business to pay a distribution yield of 6.3% in FY23.
Brickworks Limited (ASX: BKW)
This real estate ASX share provides domestic housing exposure through its Australian building products business. It has a number of businesses including Austral Bricks, concrete products, and Bristle Roofing. It has 28 manufacturing sites and more than 45 design centres and studios across the country.
Brickworks is a 50% shareholder in an industrial property trust with gross assets of more than $2.5 billion and a long development pipeline. One project, which is scheduled to essentially be done by now, is a big new distribution warehouse for Amazon in Sydney.
The company has expanded to North America and has established itself as the largest brickmaker in the northeast of the US.
It also has a major shareholding in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which is a leading listed investment conglomerate.
The real estate ASX share's normal dividend has been maintained or increased every year since 1976. That's 45 years of stability. Brickworks says it's proud of its long history of dividend growth and the stability this provides to shareholders.
Brickworks recently announced it had purchased 121 hectares of land at Bringelly in southwest Sydney to be used as a clay resource to support Austral Bricks. Brickworks is also selling 75 hectares of land at Oakdale East where a brick plant is located into the property trust. This will extend the development pipeline in order to meet the unprecedented demand for industrial development.
It's rated as a buy by the broker Ord Minnett, with a price target of $26.20.
