Orchard Funds Management cuts unit prices

Orchard Funds Management has slashed unit prices in its property funds, according to its latest report to investors.

The Orchard Diversified Property Fund's unit price had fallen 42 per cent to 75 cents at the end of February this year.

This has resulted in a one-year return for the fund of -44 per cent and a five-year return of -1.63 per cent.

According to the report, the decline in the value of Orchard’s Industrial Property Fund weighed heavily on the diversified trust.The share price has fallen from 98 cents per share to 55 cents at the end of February.

Negative one-year returns are also prevalent in Orchard’s other funds.The Childcare Property Fund has reported a -17.5 per cent return; the Commercial Office Fund a -17.5 per cent return; the Hybrid Property Fund a -22.8 per cent return; and the Primary Infrastructure Fund a -29.45 per cent return.

The Orchard Essential Healthcare Trust reported the strongest one-year performance of -3.33 per cent.

Orchard Funds chief executive officer David Hinde said the current property market environment has resulted in downward pressure on the value of assets.

“As anticipated, due to the current market environment, there has recently been widespread declines in property valuations which have led to downward pressure on portfolio values and unit proves,” he said in a letter to investors.

“Sadly, this cycle looks set to continue.”Orchard’s plan for this year is to reduce debt and conserve cash in its funds.Some funds are at the limit of their borrowings, with the Diversified Property Fund’s gearing ratio at 78 per cent.

“This year is proving to be tough and challenging, but we are confident that the de-leveraging and cash management programs put in place last year will put the funds in a better position,” the report said.

The manager is still maintaining the suspension of redemptions in its funds.