Zenith’s View
With Australian Unity Property Funds Management Limited (AUPFML) firmly installed as the new RE, management continues to pursue the short-term strategy to rationalise some of the assets, recycle capital and rebalance the portfolio to a mix deemed more appropriate to their long-term strategy.

Following our last review in 2011 while the Fund remains somewhat overweight to certain sectors, regions and tenants, there is clear evidence that the strategy is taking shape.

Zenith retains a strong level of conviction in AUPFML’s property team which underpins our faith in the ongoing strategy execution.

While the total returns under previous management and to date have been disappointing, the Fund has continued to generate moderate income yields. Since the change in RE in late 2010, Zenith has always considered the potential in the Fund to be viewed as longer term and not focussed on short term performance. While total returns are likely to continue to be subdued in interim we continue to retain faith in the turnaround strategy proposed by management and but expect that in the immediate term returns will lag our sector benchmark. 2012/13 should continue to represent a period of stabilisation for the Fund with the significant experience and active strategy of AUPFML paving the way for solid future performance.

Zenith believes that the significant experience and active strategy of the new manager is a significant positive for unit holders as we believe that this entity has greater depth and experience compared to its predecessor. Property markets are generally stabilised and notwithstanding some short-term global economic uncertainties we see a positive outlook for quality assets under strong managers over the longer term. We are of the opinion that going forward the Fund should be more than capable of providing a superior risk adjusted returns to investors and continue to hold our high opinion of the investment managers’ capabilities in this space.

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