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.”

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