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A managed fund for residential property?

Discussion in 'Managed Funds & Index Funds' started by Nigel Ward, 17th Jan, 2007.

  1. Nigel Ward

    Nigel Ward Team InvestEd

    10th Jun, 2005
    This PDS has come across my desk

    I haven't read it yet, but from a quick flick note that:

    a) there's what looks like some interesting research on residential property contained in it;
    b) Brett Davies (from LawCentral, Integrated Legal Holdings proposed float and eminent tax lawyer is on the board)
    c) the Wakelins (i.e. Melbourne agents/authors of "Streets Ahead" are involved).

    I make no comment on whether this might be a good or bad investment (as I said haven't even read it yet) so enjoy...


  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    9th Jun, 2005
    Sydney, Australia
    Not so much a managed fund as an unlisted property trust.

    It is deemed "liquid" in definition only (they satisfy some requirement by ASIC to be able to use that term) - the reality is that you may need to wait up to 90 days for your money once you request a withdrawal. This is fairly standard for unlisted property trusts.

    Entry fee is 5.5%, with up to 4.4% being for financial advisors (so I assume a minimum 1.1% entry fee ?)

    Management fee is 1.45% ... not unreasonable ... but ...

    Performance fee 18.45% of the total return above 10% per financial year ... that's pretty steep when combined with the management fee

    The fund manager will also retain 1.1% of any property sold from the trust ... so there's an additional cost to the whole fund.

    Buy spread is approx 6.3% and sell spread approx 2.33%. That's probably reasonable for a residential property trust, but it's still huge in my opinion.

    Expected to show minimal income distribution (goal is long term capital growth).

    Will use internal gearing up to 60% of the value of the gross asset value of the trust

    Won't initially hold any property in WA or QLD because of stamp duty issues.

    Seems to be focussed on inner-city and inner-suburban areas of main capital cities

    Mainly houses will be invested in (but won't exclude apartment completely)

    Goal is for properties to be self funding (ie lower gearing should allow rents to cover costs).

    So ... I think it's a pretty expensive way of investing in real estate, but given the relatively low entry cost ($10K), and the zero hassles related to managing tenants and such, it could be better method than direct residential investing for some people I guess.

    Given the relatively low liquidity, I doubt we'll see much support from margin lenders ... so you probably won't be able to gear your own investment into the trust.

    It will be interesting to see how it performs.