Property group opens childcare property trust

Boutique unlisted commercial property manager SAITeysMcMahon has launched an open-ended child care trust that intends to raise $23.5 million from investors.

The fund manager has agreed to buy 49 child care centres fromASX-listed operator ABC Learning Services for $50.2 million. The outstanding balance on the purchase will be debt funded.

The centres are located throughout the country which SAITeysMcMahon executive director Judy MacMahon says will provide geographic diversification. Income from the properties is protected by unlimited guarantee from ABC.

McMahon says the open-ended fund has the ability to acquire more centres to capture growth potential in the childcare sector and create real investment value for investors.

“When you look at the childcare-related commercial property investment offerings in recent years, the most apparent feature is they typically involve investment in a relatively small number of properties across a short duration, with significant concentration of risk related to location and operator,” she says.

“The pay-off (from these types of investments) being a fairly high income yield return for that of high risk.”

The childcare fund will be offering initial returns of 9 per cent with an average 80 per cent tax sheltering during the first five years. McMahon says the fund will have a stable income as the properties are secured by a strong tenant with long-term leases.

In a separate move, SAITeysMcMahon have added three more properties to its Diversified Property Fund (DPF) after a 30 per cent increase in inflows during the past quarter.

Funds under management in the DPF now stand at $125 million and the three new properties added will boost the geographical spread of the assets in the fund.

It has brought a Fremantle office building leased to Australian Customs for $16.65 million at a yield of 9.5 per cent as well as a West Australian Bunnings retail outlet for $10.75 million (yield 8.8 per cent) and a commercial office in Cairns for $3.75 million (yield 8 per cent).

McMahon says the DPF’s diversified investment exposure now includes 872 tenants in six property sectors throughout Australia.