With the acquisition of York Capital under its belt, Australian Unity is restructuring the way it plays the property investment market. John Wilkinson looks at where that restructure will take Australian Unity and where it believes the property market is heading.
Property is to become one of Australian Unity’s key product areas following the acquisition of syndicator York Capital.
The property portfolio will focus on mortgages, wholesale direct property funds, property trusts and syndications, according to Australian Unity general manager financial services Craig Dunstan.
The fund manager has had a long involvement in mortgages and has always managed the portfolios in-house.
Australian Unity offers a mortgage income trust, which is aimed at conservative investors. This has formed the basis for expanding the property operations of Australian Unity.
The plan is for Australian Unity to build a $1 billion presence in the property investment market through acquisition and organic growth, Dunstan says.
“The objective is to provide access to quality property and mortgage investments for a wide range of investors,” he says. “These will range from the small investor using master trusts, through to the medium-sized private and institutional investors using syndicates.”
Currently, Australian Unity has about $600 million in mortgage and property investments, having acquired products like the GEM listed property trust vehicle a few years ago.
The latest acquisition, York Capital, has $170 million of property under syndication. Dunstan says Australian Unity wants to lift that to $500 million through new syndicates or the acquisition of other syndicators.
York specialises in retail property for its syndicates, but Dunstan says future offerings will probably be in other areas of the property market. This aim for diversification has seen Australian Unity recently launch a property trust that covers a specialised area of the property market, healthcare.
This trust is offering eight healthcare properties spread across Victoria, New South Wales and South Australia. It also has the option to buy a ninth hospital in Sydney. All the properties are run by major healthcare operating companies.
“The concept enables the operators to free-up capital, while giving investors in the trust a distribution yield of between nine and 10 per cent,” Dunstan says.
“We are targeting smaller institutions with the healthcare property trusts. We have raised about $100 million from the wholesale sector.”
Following the expansion of the property portfolio at Australian Unity, Dunstan plans to expand the management team. He is about to appoint a head of property, with existing managers now looking after specific portfolios, such as healthcare and retail property.
The acquisition of York has also meant Australian Unity is now a member of the Australian Property Exchange (APX).
The APX has been formed to enable property investors to trade their units. Dunstan says the exchange should be up and running by March next year.
“It is a great concept. When you look at LPTs and the consolidation in the sector, what has happened is they have become much larger and moved into institution portfolios,” he says.
“This means they are now more like an equity than a property trust.”
Dunstan says a lot of people have forgotten that LPTs were set up for the retail investor, not institutions.
“At Australian Unity, we are now putting 15 per cent of our Property Securities Fund into securities not listed on the ASX.”
Dunstan sees the APX providing syndicate investors with the liquidity of LPTs, but while still retaining the performance tracking of direct property investment.
In a separate move, Australian Unity is also beefing up its equities funds. It is launching an emerging companies trust and an ethical investment fund. The emerging markets trust is the first time that Acorn Capital, the microcap manager 50 per cent owned by Australian Unity, has appeared on a manager’s list. Acorn has been given a 20 per cent mandate for the trust, while BNP Paribas and JB Were will manage the lion’s share.
Acorn has also recently won a $20 million mandate from the Emergency Services Superannuation Fund. The microcap manager will handle the investment strategy, while Australian Unity manages the back office.
No managers have yet been appointed for the ethical fund, which will invest in both Australian and international equities. The investment strategy will be to pick companies that are socially responsible or are attempting to establish environmental management plans.
The aim is to outperform the S&P/ASX All Ords accumulation index, while meeting the ethical mandate. Investment into acceptable companies, using pooled funds, will commence next month, Dunstan says.
