A Melbourne-based fund manager has launched its first retail property trust, which includes government-leased properties as the assets.
Australian Public Trustees (APT) is raising $30 million for an open-ended trust that owns six buildings leased to both state and federal governments.
The offering aims to raise $10 million from retail investors and $20 million from the wholesale market for the Government Property Trust.
APT director Don Christie said the company has about $129.6 million of government-leased assets in its portfolio, which ranges from government-leased property to bus fleets.
“We have moved into the retail funds management market to grow the portfolio of investors,” he said.
“We know retail investors in property want assets with security and government-leased buildings reduce the risk element of owning direct property in a fund.”
The fund has office buildings in Geelong, Victoria as well as Centrelink-leased buildings in Western Australia.
The capital raising of the new trust will fund the purchase of a $37.5 million office building in Canberra, leased to the federal Department of Health, as well as units in the syndicate that owns two Federal Government leased buildings in Victoria.
Investors in the trust will be guaranteed a fixed return of 8.25 per cent for three years and the option to redeem their units or re-invest after this period.
“Offering a fixed rate of return is unusual for property trusts, Christie said.
“However, government-leased properties offer stability of income that is difficult to find in the retail, commercial or industrial sectors.”
The length of leases on the properties ranges from two years in Geelong’s case to seven years for the property in Bunbury, Western Australia. Most of the buildings have five-year options at the end of the current lease.
To date, investors in APT’s trusts have been institutional investors and the company has not had any retail distribution network.
Christie said the manager has appointed Aurora to handle distribution of the trust to financial planners.
He said there was a “very skinny” commission for planners placing clients into the trust. The APT management fee is 1.25 per cent with no up-front or exit fees.
The fund manager plans to acquire further government-leased properties for the trust as they become available, Christie said.
“We would look at other property sectors other than offices and we do have wholesale trust that invests in health and aged care facilities leased to governments,” he said.
“Our long-term goal for the trust is to grow it so that in the long-term future it can be listed.”
