Andrew Cannane

Property Funds Association (PFA), the peak body representing Australia’s unlisted property funds industry, has appointed Andrew Cannane, Executive Director of Intertrust Australia, as President of its Executive Committee.

Mr Cannane has served on the PFA Executive Committee for 12 years, and replaces Steven Bennett, CEO Direct Property at Charter Hall, who has finished his two-year term.

PFA has appointed Melissa Kingham, Executive Director of the Haben Property Fund, as Vice President of the committee.

Paul Healy, CEO of the PFA, welcomed the new President and Vice President of the PFA Executive Committee. “We are delighted to appoint Andrew and Melissa to the roles of President and Vice President. They each bring substantial knowledge, passion and experience to the committee.

“I thank our previous President, Steven Bennett, for his outstanding leadership and steady hand during the COVID-19 pandemic.”

New President Andrew Cannane said unlisted property funds would continue to provide valuable diversification and returns for investors. “Our industry in Australia includes some of the best property investment funds and managers in the world, and I am honoured to represent them as President of the PFA.

“Direct property has an incredible track record at providing income returns and capital growth. The opportunities to use direct property funds for greater diversification is also a major benefit to investors.

“It’s an exciting time to be in commercial property investment. The innovation we are seeing across the traditional and emerging property asset classes has been inspiring, and will play a key role in the COVID recovery.”

The PFA Conference 2021 will be held in Cairns from 18-20 July 2021. The conference asks Has COVID-19 changed property permanently? The conference will explore pressing property issues including new technology and innovation, leasing challenges, and potential structural changes to the property landscape.

Keynote speakers include:

• Richard Gibbs, Chief Economist and Director, Urbis
• Jason Huljich, Joint-CEO, Centuria Capital Group
• David Green-Morgan, Managing Director APAC, Real Capital Analytics
• Michelle McNally, General Manager Property, Australia Post

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Paul Healy

More self-managed superannuation funds (SMSFs) could benefit from unlisted property funds to access diverse property investments and avoid becoming overly concentrated in just one or two assets, according to Property Funds Association.

‘Concentration risk’ from a lack of diversification among SMSFs was recently in the spotlight as ATO recently reviewed SMSFs using Limited Recourse Borrowing Arrangements (LRBA) where money has been borrowed to buy direct property, often a single asset which represents more than 90 per cent of the fund’s assets.

This followed a report handed down by the Council of Financial Regulators earlier this year, which expressed concern over the “prevalence of property as the main asset purchased under an LRBA, most commonly by low-balance SMSFs (under $500,000) who have little investment diversification and high loan to value ratios (LVRs), making these funds particularly susceptible to shifts in the property market”.

Paul Healy, CEO of Property Funds Association (PFA), the peak industry body for the $125 billion Australian unlisted wholesale and retail property funds sector, said SMSFs can diversify across property asset classes including office property, industrial property, and emerging alternatives such as healthcare, via unlisted funds.

“Many SMSFs are putting their eggs into one basket property-wise, which is a missed opportunity when you consider the huge property investment universe available via unlisted funds.

“Unlisted funds provide access to property assets which are beyond the reach of most direct investors, including commercial and industrial and overseas assets which have performed strongly.

“SMSFs using unlisted property funds also benefit from increased diversification, from being exposed to several different properties and strategies.”

Mr Healy said unlisted property funds have delivered strong returns due to an ability to combine capital growth with income from rents, while showing lower volatility compared with equities and listed property trusts.

Research by Zenith Investment Partners, MSCI, the Property Funds Association and the Property Council of Australia has shown unlisted property has delivered strongly for the last five years, with total returns at 22 per cent per annum (to 31 December 2018) – Australian equities delivered 5.6 per cent per annum for the same period.

About Property Funds Association

The Property Funds Association of Australia is the peak body representing the Australian unlisted wholesale and retail property funds sector, currently worth more than $125 billion.

As the professional association for Australian Financial Services Licensed (AFSL) property fund managers, their advisors, consultants and representatives, we support and promote investment into unlisted property trusts, funds and syndicates, and assist members in developing and operating their businesses.

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Paul Healy

Property Funds Association (PFA), the peak industry body for the $125 billion Australian unlisted wholesale and retail property funds sector, has voiced concern against Victoria’s new stamp duty laws which it says will create higher operating costs for unlisted property funds.

Changes to The State Taxation Acts Amendment Act 2019 received royal assent on 18 June 2019 and incorporated significant surprise amendments to stamp duty, which is sending shockwaves through the property industry.

Paul Healy, CEO of Property Funds Association (PFA), said “Victoria’s stamp duty changes have been introduced without consultation and will likely increase costs for unlisted property funds, which may then be passed on to unlisted property investors.”

He said the new rules could impact any property transactions within a fund. “There are particular concerns over how the new stamp duty rules will apply to property transactions, and how they will apply to fund performance fees, acquisition fees, and disposal fees.

“PFA believes there needs to be more scope for exclusions or exemptions to ensure funds are able to carry out their business without being unreasonably taxed.”

Most issues centre around changes to the ‘economic entitlement provisions’ under the Victorian Duties Act. Changes include removing the 50 per cent threshold and moving most of the provisions from the ‘landholder duty’ regime into the ‘transfer duty’ regime.

Prior to the new provisions taking effect, duty was only imposed under the economic entitlement provisions where the owner of the land was a private or wholesale unit trust, or a private company, and the economic interest acquired was 50 per cent or more of the relevant economic entitlement (e.g. rent, profits, capital proceeds etc.): PFA says removing this 50 per cent threshold and removing the restrictions in the landholder regime means a much wider range of entities and activities will be caught in the stamp duty net.

Victoria’s State Revenue Office has issued administrative guidance on these new provisions, but PFA says appropriate exclusions from these new provisions should be legislative, rather than administrative. “This guidance has limited value to many unlisted property funds and does not provide adequate certainty for taxpayers as it does not have legislative force and only addresses ‘plain vanilla’ circumstances.

“In PFA’s view, further legislative amendments are warranted to provide clarification and certainty for taxpayers”, Mr Healy concluded.

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The Executive Committee of PFA recently elected Steven Bennett, Head of Charter Hall Direct, as the new President of PFA’s National Executive Committee, taking over the role from Mark Pratt, Executive General Manager –  Property at Australian Unity.

The Association also elected Andrew Cannane, Executive Director at Evans Dixon as the Committee’s new Vice President.

Formed in 1998 PFA was established to provide the growing number of direct property investors and managers with an organisation to represent their interests, promote their industry and provide a forum for research and education.

Paul Healy, Chief Executive Officer, PFA noted: “We welcome our new President and Vice President to the Executive Commitee. The Executive Committee is the decision-making body of the Association and comprises of PFA members which represent the various areas of the Association’s constituency. Both Steven and Andrew are regarded as experienced direct property professionals in the commercial property space and we look forward to their insights and contribution in growing investor awareness around the direct property sector.

“I would like to thank our previous President, Mark Pratt, for his contribution towards growing the Association’s scope to represent the advisors, consultants and representatives of property investors and managers.”

Steven Bennett, Head of Charter Hall Direct, added: “I am honoured to be appointed in this new role. Having been a member of the Association since 2014, I believe the Association will continue to play an integral role in representing the interests of the direct property industry.

“Over the last two decades, this sector has grown dramatically and has become a core investment class for growing the wealth of Australian investors by providing strong risk adjusted returns and a stable source of regular income.

“Apart from the high levels of ongoing income, what makes direct property so compelling is its low correlation with other asset classes providing effective diversification benefits and lower relative volatility. This means direct property investments react in a different manner to varying economic conditions compared to other major investment classes such as shares and bonds.

“For this reason, we believe, investors will continue to hold direct property as an essential component in their portfolios,” said Mr Bennett.

The Annual PFA Conference for 2019 will be held in Hobart from 5-7 May. It will review the activity in global and local markets and examine whether current times are a crisis, challenge or catalyst for property investment.

Key Conference speakers include:

• David Harrison, Managing Director and Group CEO, Charter Hall
• Simon Garing, Acting Chief Executive Officer and Executive Director, Cromwell EREIT Management
• Justin Smirk, Director – Senior Economist, Westpac Institutional Bank
• Penny Ransom, Group Executive, Head of Investment Management, Investa Property Group
• Rob de Vos, Managing Director, Arena REIT

More information about the Conference.

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Paul Healy

Unlisted property funds need to start considering measures to comply with the government’s recent introduction of product design and distribution obligations, according to Property Funds Association, which also says the new legislation could see fewer choices for investors.

The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Power) Bill 2019 (Act) was passed into law on 5 April 2019. The product intervention power applied immediately and the design and distribution obligations will apply from 5 April 2021.

Paul Healy, CEO of Property Funds Association (PFA), the peak industry body for the $125 billion Australian unlisted wholesale and retail property funds sector, said the passing of the Act will disappoint many in the unlisted retail property funds industry. “PFA believes the Act mandates a compliance regime which could see managers shun retail products and favour wholesale products, limiting the choices available to retail unlisted property investors.

“Many unlisted property funds will find it more difficult and expensive to bring retail products to market.” The Act does not apply to wholesale products.

Mr Healy said two years is not a long time to implement a significant new compliance framework in property funds management, meaning property fund managers already need to consider their compliance measures.

The biggest looming challenge facing retail funds is the required Target Market Determination when creating new funds. “The Target Market Determination introduces several possible issues which could make bringing new products to market more costly, and delay some projects.

“It is hoped ASIC and industry guidance will provide clarity and ensure the rules are applied consistently.”

Mr Healy said the new Act could be seen to shift responsibility from the financial adviser to the product issuer. “Product issuers may need to take extensive precautions with investors, including potential for needing to put in place fact finding measures, consumer testing or/and ensuring that financial advice is provided to prospective investors, even for simple products which are well understood in the market place.

“It’s possible issuers may outsource some aspects related to the Target Market Determination, which potentially introduces other risks.”

Property Funds Association will be hosting its annual conference from 5-7 May 2019 in Hobart, one of the highlights on the property fund industry’s calendar – this year’s theme is ‘Critical Change: Crisis, Challenge or Catalyst for Property Investment’.

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The appointment highlights the PFA’s focus on tapping in to the industry’s top talent to deliver meaningful guidance, insight and support for the unlisted property sector.

Mr Healy has a track record of outstanding accomplishment in property investment. For the past 22 years, he has contributed to the success of BlackRock as its Managing Director and Head of the Australian Real Estate team. During his tenure at BlackRock, total property funds under management in Australia grew to over $1bn.

Jason Huljich, President of the PFA and CEO of Centuria Property Funds, said: “Paul’s acceptance of this position represents another step forward for the PFA and its members. We expect first hand benefits from his experience in a number of key areas, including continued improvement in governance and achieving best practice industry standards. The PFA recognises that supporting our members and improving the profile and performance of our sector requires a continued focus on how to do things better – and Paul can deliver real insights in this regard.”

Speaking of his appointment, Mr Healy said: “The PFA is the peak professional body for the unlisted property sector and as such, one whose importance I have always recognised. I look forward to playing an active role in strengthening its ability to promote and support investment in unlisted wholesale and retail property funds, improving the commercial environment in which our members operate and developing a more unified association with strong membership benefits.”

The PFA remit is to represent and further the interests of direct property investors and managers, including through industry promotion, research and education.

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