Demand rises for unlisted funds

The volatility in the sharemarket has led to a rise in demand for unlisted property funds, which offer the haven characteristics of real estate without the concerns about sudden price movements.

The volatility in the sharemarket has led to a rise in demand for unlisted property funds, which offer the haven characteristics of real estate without the concerns about sudden price movements.

Results from the Unlisted Retail Property Fund Index, released by IPD, an MSCI brand, and sponsored by the Property Funds Association of Australia showed total returns over the past 12 months have stayed around 7 per cent to 8 per cent, with the latest quarterly result indicating a 7.2 per cent total return for the year to March 2013.

On an individual basis, the unlisted wholesale funds, managed by the listed real estate investment trusts, have been active.

On Monday, the DEXUS Wholesale Property Fund unveiled expansion plans for the Westfield Miranda shopping centre, of which it owns a half share.

Analysts have forecast that these wholesale funds, which are also in the GPT, Federation Centres and Goodman Group stables, will be more active in developments and acquisitions in the coming year than their listed counterparts.

There is also anticipation about what action Mirvac's chief executive Susan Lloyd-Hurwitz may take in the unlisted funds sector.

Mirvac has established the Australian Office Partnerships and Australian Residential Partnership funds and the group is having discussions with a group of capital partners.

Jason Huljich, the chief executive of Centuria Property Funds and recently elected president of the Property Funds Association, says the unlisted property fund sector is responding to investor focus on simpler structures and the sector is looking more attractive for investment

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.

A Lonsec Research report said pre-tax yields for the unlisted funds range from 7.5 per cent to 10 per cent and gearing levels are now in the 40 per cent to 55 per cent range, down from 55-66 per cent.

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