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Back to Basics for the Unlisted Property Fund Sector

PFA says the sector has a renewed focus on the bricks and mortar of property investment.

The Property Funds Association of Australia (PFA) said today that the unlisted property fund sector is responding to investor focus on simpler vehicle structures and the sector is looking more attractive for investment, confirmed by the recent release of industry reports.

Most new unlisted property fund vehicles raising funds in the market are providing ‘back-to-basics’ closed-ended syndicates with a single asset and quality tenant and a long weighted average lease expiry says the report “Direct Property Funds Sector Review” by Lonsec Research Pty Ltd.

The report also highlights that pre-tax yields for these vehicles range from 7.5%-10% and that gearing levels are now in the range 40%-55%, down from 55-65%.

Jason Huljich, CEO of Centuria Property Funds Ltd and recently elected President of the Property Funds Association of Australia (PFA), welcomed the report saying, “It is good to see the analysis of what we have known for a while now, that the unlisted property fund sector is in recovery and investors are back in the market supporting managers with quality offerings”.

The report gives an update on the status of funds and managers which have had difficulties but also notes the emergence of new boutique fund managers. Mr Huljich commented, “It is always a good sign of confidence when new fund managers start to emerge, both in the value of the underlying property markets and in the appetite of investors to reinvest in the sector.”

Results from the Unlisted Retail Property Fund Index, released by IPD, an MSCI Brand, and sponsored by the PFA reinforce the Lonsec Report’s findings that the sector has come a long way from the depths of the property market crisis in 2009. Total returns over the last 12 months have stayed around 7%-8%, with the latest quarterly result indicating a 7.2% total return for the year to March 2013.

Mr Huljich said, “The PFA is pleased to support rigorous analysis of the unlisted property fund sector, both at the retail and wholesale level. With these figures, our fund managers can properly benchmark their performance, and we look forward to seeing the results as the sector continues to improve.”

                                                              --ENDS--

 

The Lonsec rating (assigned April 2013) presented in this document is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421445. The rating is a “class service” (as defined in the Financial Advisers Act 2008 (NZ)) or is limited to “General Advice” and based solely on consideration of the investment merits of the financial product(s). In New Zealand it must only be provided to “wholesale clients” (as defined in the Financial Advisers Act 2008 (NZ)). It is not a recommendation to purchase, sell or hold the relevant product(s), and you should seek independent financial advice before investing in this product(s). The rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria.

For further information regarding Lonsec’s ratings methodology, please refer to our website at: https://www.lonsec.com.au/aspx/Public/Documents/Ratings%20Definitions.pdf

 

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