Fund manager Trilogy has flagged strong demand for its unlisted property syndicate from SMSF investors.
The group is looking to raise $15.5 million in equity from SMSF and high net worth individuals for a new syndicate investment vehicle designed to provide monthly income backed by a “quality office property”, the company stated.
Trilogy deputy chairman Rodger Bacon said the investment has a 45 per cent maximum gearing ratio, with the debt facility fixed to mitigate refinancing risk.
The property is currently leased until 2021, with annual rental increases of four per cent, by insurance broker iSelect, who has a renewal option under which the lease resets to 10 years from the date of re-signing - adding “substantial value” for investors, according to Mr Bacon.
Mr Bacon said the investment strategy should be particularly suited to SMSF investors.
“The basic thing about a property syndicate done like this is it gives investors access to an asset they couldn’t get on their own,” he said.
“They can buy into a valuable, sizeable asset in an A-grade building, which means dealing with important, sizeable tenants.”
Trying to do that on your own through an SMSF is virtually impossible, he added. The syndicate style of investment also allows SMSF investors to properly diversify while still gaining access to property investments, he added.
The Cheltenham fund has an investment timeframe of five years, with a headline rate of return of 8.75 per cent per annum, paid via monthly distributions. The investment also has “an edge” in that it has development approval to expand the property, but the option is in the manager’s favour, meaning there is no obligation if it chooses not to, Mr Bacon said.
“For SMSF trustees, a quality, unlisted property syndicate run by a licensed issuer can be a more flexible, less complex and less risky way to access the benefits associated with property investment,” said Mr Bacon.
“Trustees need to be aware of the diversification and liquidity issues associated with using limited recourse borrowing arrangements to fund single assets, particularly those close to retirement age, who invariably require ready access to capital to provide an income stream,” he added.
Mr Bacon also addressed a recent approach from the Australian Securities and Investments Commission asking Trilogy to update its PDS and advertising. He described the approach as “routine” in terms of funds management business, and said requested amendments had been made.
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