Exit opportunity for investors in frozen funds

A new property securities fund will give wholesale investors in unlisted frozen property funds the opportunity to sell their units.

The Unlisted Property Securities Fund from Key Capital will look to purchase unitholdings in the frozen funds at a discount to current valuations, adding liquidity to the sector, the company said.

“It is estimated that unit holders in unlisted property trusts are clutching $2 billion in frozen assets with no available buyers,” said Key Capital managing director Andrew Patrick.

“[The Australian Securities and Investments Commission] recently relaxed the rules on how redemptions could be fulfilled, but it is doubtful this measure will create any liquidity in funds,” he said.

“Many wholesale investors are under pressure to sell to meet redemption requests from their retail investors, and are willing to do so at a substantial discount to the net tangible asset value. We believe with the right research, this presents one of the best buying opportunities ever presented to the market.”

Investors would have the opportunity to make capital gains both from buying assets at a discount and from future capital growth, Patrick said, while rental revenue was also likely to increase over time.

Key Capital is looking to seed the first Unlisted Property Securities Fund with $2 million and is seeking to raise between $25 and $50 million, the company said. The opportunity would be open to medium sized institutional investors down to individual retail investors.