The DPF offers a diversified property portfolio with a balanced sector and geographic allocation providing a stable income return from earnings achieved through high occupancy and a strong weighted average lease expiry.

If the option is exercised, settlement of the property will occur in late October 2014. The property purchase will be accretive to DPF’s income return and will be funded by capacity within the existing debt facility of the fund, which has a current gearing level of 38 percent.09

The property at 200 Victoria Street, Carlton, Victoria is a high quality, seven level, A-grade office building with associated retail and car parking leased primarily to the Environmental Protection Authority and Trinity College, the University of Melbourne. It comprises 7,490 sqm office accommodation over six levels, 422 sqm of retail space over three tenancies on the ground floor, and eight secure on-site car parking bays. The lease expiry is 7.7 years weighted by income and area.

Mark Lumby, head of property funds – retail, at Australian Unity Real Estate Investment, says: “The acquisition will enhance DPF’s geographic, sector and tenant diversification as well as the earnings and distribution return for investors by providing stable, secure long term cash flow – enhanced by fixed annual rental increases – through high quality calibre tenants.

“The property was substantially refurbished in 2009 to become one of Melbourne’s most environmentally sustainable office buildings with a 5 star National Australia Building Energy Rating and a 6 star Green Star rating for office design.

The property will improve the fund’s sector allocation moving closer to the fund’s strategy of a neutral allocation for office, retail and industrial – the weighted average lease expiry will also be improved to be greater than 5 years.

“Following settlement, more than 50% of the fund’s income will be derived from national tenants” Mr Lumby says.

The deal was negotiated off-market by Leigh Melbourne of Colliers International.

The post Australian Unity acquires option over high profile office building appeared first on AdviserVoice.

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.

The post Zenith Recommended on Australian Unity Diversified Property Fund appeared first on AdviserVoice.