Macquarie Direct Property Fund announces series of merger and acquisition
Macquarie’s flagship direct property fund, the Macquarie Direct Property Fund (MDPF), continues to build its local as well as global portfolio in response to strong ongoing demand for direct property amongst Australian investors.
MDPF formally announced a series of mergers and acquisitions which have propelled the Fund to more than $800m in assets, an increase of almost 200% over the 12 months to July 2007.
The Fund also announced another successful quarter, with the Fund producing an annualised return of 27.5% for the period of January 2006–June 2007 versus the benchmark 20%.
According to MDPF, the weight of money flowing into self managed superannuation funds was propelling the high level of interest in the Fund, particularly from financial advisers. Macquarie Real Estate’s recent global property adviser roadshow, held in Sydney, Brisbane and Melbourne last week, had experienced unprecedented demand from the adviser community.
Merger and acquisition activity for the Fund over the past weeks has included:
The purchase of the 11 storey, 8,400 sqm office building at 71 Queens Road, Melbourne, for $26.25m. The purchase was effected off market through the Macquarie network, and represents a 7.9% yield to investors.
The popular building is currently fully let, with the potential for further immediate rental and capital value upside to be achieved through active local management. Macquarie Real Estate’s buying power will be applied to building outgoings to seek additional benefits for investors.
According to Macquarie Real Estate’s Market Outlook 2007, the Melbourne office sector now holds appeal as the affordable major Australian office market. With strong rental growth expectations, yields are expected to firm further.
Last week MDPF committed $60m to the Goodman Australia Industrial Fund, to be invested over two $30m instalments. The first instalment has been completed and the second will occur in January 2008.
The move provides MDPF with a foothold in the domestic industrial sector, complementing the Fund’s exposure to industrial markets in both Europe and Asia and aims to increase the overall diversification of the portfolio.
Industrial assets now account for approximately 16% of the MDPF portfolio, with the Fund enjoying a close ongoing relationship with the Goodman group, providing strong prospects for future investment opportunities.
In June MDPF purchased a 50% interest in an eighth CBD office building at 81 St Georges Terrace, Perth, for $21.1m. Also an off market deal conducted in partnership with the Macquarie Bank Group, the investment complements the income and capital growth mandate of the Fund well, which will look to use its asset management expertise to manage upcoming opportunities for the property.
Perth is currently experiencing tremendous rental growth and the targeted acquisition seeks to take advantage of that for MDPF investors: this is evidenced already by the $22.8m 30 June revaluation of the building.
Earlier this month MDPF investors overwhelmingly voted in favour of merging MDPF with another Macquarie fund, Macquarie Direct Property No.11, East Coast Portfolio (East Coast).
The proposal received overwhelming support with an average of 95% of participating East Coast and MDPF unitholders voting in favour. The merger adds five eastern seaboard office properties to further diversify the portfolio and is expected to underpin regular income for all investors.
Global growth continues:
On the global front, MDPF has committed $119m to international investments in Asia and
Europe through opportunities garnered through the Macquarie pipeline. Investors have enjoyed impressive growth in the existing wholesale investments to date:
Macquarie Goodman Hong Kong Wholesale Fund now has a unit price of $1.13, up from $1.07 and
Macquarie’s jointventure managed Chinese retail fund (MWREF) now has a unit price of $1.30, up from $1.00.
Leasing update:
The direct property portfolio up to 30 June 2007 has continued to perform well with average occupancy increased to 96%. Key leasing deals over the quarter included:
A two year lease renewal by Powertel at 461 Bourke Street in Melbourne over more than 800sqm and
Leases signed or heads of agreement reached over more than 2,500sqm at 300 Adelaide Street in Brisbane.
Portfolio and Fund composition update:
As at 1 July 2007 the portfolio comprises 13 Australian office properties generating regular income for investors while the further diversified Fund has grown to more than $800m in assets.
The result is 26% of the Fund invested in NSW direct property, 35% in Victoria, 13% in Queensland with 11% invested in international direct property wholesale funds.
Launched in January 2006, MDPF has achieved annual total returns of 27.5% since inception, outperforming its benchmark, the office subindex of the Mercer Unlisted Property Index, by more than 7%.
MDPF’s access to property opportunities through the 500strong global Macquarie Real Estate network, as well as broader Macquarie Bank Group, was starting to strongly resonate with advisers as well as individual investors.
MDPF’s early access status and high exposure to emerging direct global property opportunities is strongly contributing to increased fund flows, as advisers become aware of the Fund and the longterm growth and income opportunities it offers investors.
MDPF would continue to deliver on its broad investment mandate. Its aim is to provide regular, tax effective income for MDPF investors from a growing portfolio of direct property, unlisted wholesale funds and listed property securities.
24-Aug-2007