Deutsche Asset Management has rolled out a listed property product which will offer investment into a number of David Jones retail properties.
The product is the result of David Jones selling five of its properties in Melbourne and Sydney and then leasing them back from the property trust for a period of 30 years.
The trust will issue units with a total issue price of $366 million.
The units in the equity vehicle will be offered as installment receipts known as Infrastruture Yield Securities (IYS) totalling $87 million. Head of product development Robert Gipslis says the IYS will be set up as an installment receipt with investors paying an initial $2 of the $8.41 unit price.
A debt instrument called David Jones Finance Notes is also being issued in relation to the transaction. The total amount of the finance notes on issue will be $64.8 million The finance notes will return a minimum yield of nine per cent in the first two years, according to equity derivate sales executive Harry Krkalo.
“We are predicting a conservative annual return of 13 per cent and a projected maximum annual return of nearly 19 per cent over 10 years after tax for an investor on the highest marginal tax rate,” Krkalo says in relation to the IYS.
Deutsche Private Banking head of investment research Tom Murphy says the IYS investment has a large geared position already and was useful for private banking clients and more sophisticated investors who are comfortable with a ten year time frame.
On the other hand Murphy says the finance notes were better suited for use in a superannuation or balanced portfolio outside the core investments.
“The returns on the finance notes will be paid at all times as the debt is primary debt and cannot be avoided. At the same time since it is a debt instrument any movements on the stock price of David Jones will also have little or no effect,” Murphy says.
The two instruments are open for investments and are being distributed at the present through a number of financial planners and private bankers. The offers are set to close for investment on December 11.
