Boutique mortgage and property manager AustFin Group has released a new property syndicate with a Melbourne office block as the sole asset.
The manager plans to raise up to $8.8 million towards the purchase of the two-storey office block in the inner city suburb of Richmond.
It is fully let on a 10-year lease at a current rent of $846,421 a year, and the syndicate hopes to deliver a 7.7 per cent return.
The cost of the building is $10 million and AustFin director Robert Norman said gearing levels for the syndicate would not exceed 50 per cent and that it aimed to run the trust at 25 per cent gearing subject to investor funding.
He said the syndicate was a ‘back to basic’ property trust that did not reflect what had occurred in the sector prior to the financial crisis.
“Many investors were adversely affected by the erosion in value some sophisticated investments experienced in recent times,” Norman said.
“AustFin believes investors, and their advisers, now have a strong preference for simpler, more transparent investment products.”
He said the structure of the syndicate is one that was common several years ago, a single property investment with a fixed term — six years.
“In more recent times, promoters have preferred open ended trusts, buying and selling properties as opportunities arise,” Norman said.
“As is now apparent, many of these pooled trusts are experiencing problems through either having bought properties at inflated values, or geared up against revaluations undertaken at the top of the market.”
He said with these values no longer being valid, in many cases the result has been good investment properties being sold at substantial discounts to preserve bank funding lines.
AustFin Group currently has $50 million of funds under management.
