Australian Unity Investments (AUI) has made the decision to close its Mortgage Income Trust (MIT) and Wholesale Mortgage Income Trust (WMIT), due largely to market sentiment since the global financial crisis and the trusts' inability to meet the liquidity needs of retail investors.
AUI general manager property, mortgage and capital markets Mark Pratt said that in view of the introduction of the bank deposit guarantee – which had seen major withdrawals from mortgage trusts – the most equitable outcome for investors was to close the trusts.
The closure of the MIT contradicts comments made by Pratt late last year. At that time AUI announced that it would be winding down its High Yield Mortgage Trust.
"We have been in regular contact with investors and we understand that liquidity is their over-riding concern," he said.
"We expect to return capital to all investors in the trusts over the next three to four years."
According to AUI, the MIT (launched on 31 March 1998) and the WMIT (launched on 31 December 2002) have delivered an income return of 5.46 per cent and 5.95 per cent per annum since their inception until 30 September 2012.
AUI stated that it expects to make an initial payment to trust investors before Christmas of up to 10 per cent of investors' capital, and to continue to make regular payments on a six-monthly basis.
The trusts will continue to be managed by AUI up until the end of 2015, at which point it is expected all mortgages will be repaid to the trusts, and capital returned to investors, the company stated.
Pratt said despite the closure of the funds, mortgage trusts still filled a niche for both investors and borrowers, and AUI would continue to use its commercial lending capabilities to create alternative investment options.
