Australian Unity Investments (AUI) is seeking investor approval to convert five of its existing retail property syndicates and trusts

into a single fund.The proposal, which was developed after intensive research and analysis, will create a $400 million Retail Property

Fund that would be one of Australia’s largest unlisted retail property funds, initially holding seven properties in New South Wales,

Queensland, Western Australia and Victoria.

 

Mr Martin Hession, head of property at AUI, said that the proposal will be voted on by investors at meetings to be held at the end of

November.

 

“We have put forward this proposal now, even though the majority of our syndicates won’t reach the end of their investment terms

for several years, because we believe it is in the best interests of investors, providing improved liquidity and diversification, better

capital management outcomes, and reduced income volatility.“At the same time, investors will retain an interest in properties that

have delivered excellent returns for them over a number of years.

“While the syndicate structure has worked well in the past, it always had limitations that, in the current market, can cause concern

for investors, particularly liquidity.  For example, syndicate investors are generally locked in to their investment for the duration of its

six or seven year term and, with continued market uncertainty, this may not now be appropriate.

“Research confirms our view that fixed term syndicates are no longer as popular or as desirable for investors as they were,” Mr

Hession said.

 

He said that converting syndicates into open-ended trusts is an approach that AUI has successfully used in the past, when it

converted the Bellarine Property Syndicate into an open-ended fund when it had reached the end of its term.

“Turning a syndicate into an open-ended trust – or, even better, merging several complementary syndicates into a geographically-

diversified trust – gives investors access to a number of quality, large-scale direct properties. 

“A larger fund also helps our managers to negotiate better lending arrangements – an important consideration in this interest rate

environment.  This not only helps to boost a fund’s returns but also provides managers with greater flexibility when it comes to

expanding, improving or acquiring more properties for the fund.”

 

Mr Hession added that across the industry there are currently many property syndicates reaching the end of their terms that could

result in a number of properties coming onto the market at the same time, possibly impacting their sale price.

“If properties held by a syndicate are delivering good returns then it makes no sense to sell them, and particularly not at a time when

there are a number of other properties coming onto the market, and a limited number of buyers. 

“On the other hand, if we do have a recession, single property investments become vulnerable if occupancy rates fall and diversity is

needed to protect investors.

 

“We believe that our proposal is an excellent option for investors, and it satisfies the demands of maintaining ownership of an

excellent stable of properties, as well as creating diversity, liquidity and flexibility,” he said.

 

The five retail property syndicates and trusts that would form the new Retail Property Fund are:

• Retail Property Trust: an open-ended fund holding the Waurn Ponds Shopping Centre in Geelong, Victoria.  It was created in 2005 when the Bellarine Property Syndicate was converted to an open-ended fund
  
• Regional Retail Property Investment: holding two trusts, one with a homemaker centre and call centre in Ballarat, Victoria, and one with a shopping centre in Tamworth, NSW
  
• East West Retail Property Syndicate: holding one shopping centre in North Blackburn, Victoria, and one in Thornlie in WA
  
• Retail Property Trust – Sunshine Homemaker Centre: in Maroochydore, Queensland
  
• Property Syndicate – Wyong: holding twin service centres on the F3 Freeway, north of Sydney.

 

Under the proposal, the investors will exchange their current units for units of equivalent value in the stapled Retail Property Fund,

without triggering material tax consequences and without interrupting distributions.  There will also be an initial withdrawal offer

(subject to a maximum cap of $20 million).  AUI commissioned KPMG to provide an independent expert report that concludes that the

proposal is fair and reasonable for investors.

 
Australian Unity Investments is the funds management arm of financial services, health and retirement living services provider

Australian Unity.  It has over $6.2 billion in funds under management.  Its investment approach is to use its established in-house

expertise in property and mortgages while also forming joint ventures and strategic alliances with other organisations with specialist

expertise.

 

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For more information please contact:

Mr Martin Hession

Phone: 03 8682 4408

Email: mhession@australianunity.com.au