Coming of age for Centuria Diversified Property Fund
Doug Hoskins discusses how the Centuria Diversified Property Fund’s planned purchase of its first direct asset represents a step change for the fund.
The Centuria Diversified Property Fund (CDPF) is set to move up a grade as it plans to purchase its first direct commercial property asset in the near future. CDPF has now surpassed $50 million in assets under management and is currently working through a pipeline of direct commercial property assets for potential acquisition.
CDPF is an open-ended unlisted property fund, which has the benefit of a limited monthly withdrawal facility for investors with liquidity considerations. CDPF aims to provide investors with tax-effective monthly income and the potential for long-term capital growth through a diversified commercial property portfolio.
CDPF aims to invest in 80% in real property (both directly and indirectly via investing in units in unlisted property funds) and 20% in liquid assets including A-REITs (15%) and cash (5%).
Once finalised, the purchase of its first direct asset represents a step change for CDPF and should improve its yield. It has always been our intention to purchase direct assets for CDPF as investments increased, enabling us to leverage our in-house property funds management and property services capabilities to unlock greater value for the benefit of investors.
For more than 20 years, Centuria Property Funds Limited (CPFL), the Responsible Entity for CDPF, have been in the business of providing investors access to quality commercial property (that would otherwise be out of reach for many) through unlisted and, more recently, listed property funds.
Quality commercial property – when purchased well and actively managed – has been long recognised for its investment potential. Both listed and unlisted trusts have their advantages (and we believe a sound investment portfolio should incorporate both), the challenge comes in accessing unlisted funds which are more illiquid (with cash locked up for around five years) and a higher entry point (from $50,000).
As a result, CPFL made the decision to create a fund which would offer investors exposure to unlisted property, with limited liquidity – the CDPF. The fund has daily applications and unit pricing, a limited monthly liquidity facility and distributions paid monthly.
The benefits of diversification
Diversification is important, as not all assets in an asset class move in the same direction. For example, according to an industry report, unlisted property funds for retail investors outperformed listed real estate trusts, direct property investments and the broader equities market in 2018. Unlisted property funds delivered a total return of 13.8% over the calendar year according to the latest quarterly report by Zenith Investment Partners, MSCI, the Property Funds Association and the Property Council of Australia1.
Our open-ended CDPF not only offers diversification through its unlisted property fund investments, but also through the geographical diversification of these funds’ underlying assets. CDPF is able to offer the best of both worlds – limited liquidity and income.
The current climate for property highlights the importance of funds that offer true diversification. Its diversified mandate sees CDPF continuing to seek opportunities to further diversity its investments with the objective of providing tax-effective monthly income with and the potential for long-term capital growth.
1 The Australian Financial Review, Unlisted property funds outperform in 2018, 10 March 2019
This article was issued by Centuria Property Funds Limited (Centuria) (ABN 11 086 553 639, AFSL 231 149), a wholly-owned subsidiary of Centuria Capital Group (ASX: CNI), as Responsible Entity for the Centuria Diversified Property Fund (ARSN 611 510 699). The information in this article is general information only and does not take into account the financial circumstances, needs or objectives of any person. Centuria is the responsible entity of a number of listed and unlisted property funds, each of which are issued under a product disclosure statement (PDS) that is available on Centuria’s website centuria.com.au for all funds open for investment. An investment in any of Centuria’s property funds carries risks associated with an investment in direct property including the loss of income and capital invested. The risks relating to an investment are detailed in each Fund’s PDS and Centuria strongly recommends that the PDS be downloaded and read before any investment decision is made. Centuria receives fees from investments in its property funds. Past performance is not a reliable indicator of future performance.