Macquarie merges property offerings
Macquarie Direct Property Management has launched an open-ended unlisted direct property fund formed from a merger of five of the firm’s unlisted direct property syndicates.
The Macquarie Direct Property Fund (MDPF) is focused on investing in both domestic and offshore direct property with the aim of deriving income from direct property rentals.
The fund’s inception comes after a review by Macquarie to assess the current state of the direct property market and what the firm’s researchers, advisers and investor base were looking for from the sector.
“We also had a number of syndicates here that were coming up to maturity, so we had an opportunity to really look at those existing investors and work out what the best opportunity was to provide value for them, either to sell the buildings, or potentially roll into a new fund, like the MDPF, to provide them with a greater return,” Macquarie Direct Property general manager Richard Stacker said.
The fund will be introduced to the market on January 1, 2006, and will start with $236 million in assets under management comprised predominantly of six Australian office properties.
It will also include a listed property trust (LPT) component designed to take advantage of rental incomes in the LPT market and offer investors a limited amount of liquidity from the fund. This component will have a minimum limit of 5 per cent and a maximum limit of 50 per cent and will also allow the fund to source the right properties in which to invest.
Furthermore, the structure of the product will allow it to participate in additional return producing activities.
“We’ve also put in a couple of special unique opportunities in this fund whereby the manager can participate in some sub-underwriting. That means we can enhance returns to investors because you get paid to sub-underwrite. The other thing we’ve done differently is enable the fund to take opportunities in initial product offerings so before they come to the market this fund can actually invest in those products, and typically when they are listed there is a spike in the price,” Macquarie Direct Property chief executive Richard Cutler explained.
The fund is expected to generate a return of 8.1 per cent in its initial year with a tax-deferred component of income of 63 per cent. A base management fee of 0.69 per cent will be charged along with a 20 per cent performance fee levied upon the amount of outperformance compared to the Mercer Unlisted Property Funds Index. This performance fee is capped at 1 per cent of the fund’s gross assets per annum.
Macquarie is now in the process of attracting new investors through its adviser network and existing investors. The bank believes the fund will appeal to direct property investors seeking steady income.
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