Centuria Diversified Property Fund delivering monthly income

Funds Management

by Jessica Amir

Doug Hoskins, Fund Manager of the Centuria Diversified Property Fund, discusses the unlisted fund, its objectives and key metrics and provides an overview of the portfolio.

Jessica Amir: Thanks for tuning into the Finance News Network. I'm Jessica Amir. Today, I'm at the offices of Centuria Capital (ASX:CNI) with the fund manager, Doug Hoskins of Centuria Diversified Property Fund. Well, thanks so much for having us, Doug. It's great to see you again.

Doug Hoskins: Thanks very much for coming in.

Jessica Amir: So for those who haven't heard of this fund, just give us an introduction.

Doug Hoskins: The Centuria Diversified Property Fund is an unlisted property trust, which was established in 2016. The Fund aims to provide monthly tax effective income and potential for long-term capital growth. The Fund's a little bit different from your traditional unlisted syndicate. Most unlisted syndicates have one or two assets and usually a fixed term of five or so years.

Conversely, the Diversified Fund is a multi-asset fund and it's open-ended. Another important component of the Diversified Fund is that it offers investors a monthly limited at liquidity facility. The Fund has a target investment allocation of 80 per cent property, so that can either be through unlisted syndicates or direct property itself and 20 per cent in liquid assets, which provides that important liquidity facility for investors. CDPF is now on multiple investment and superannuation platforms.

Jessica Amir: So before we talk about the investment portfolio and what it's made up of, just tell us about the key features of the Fund.

Doug Hoskins: The Fund is a multi-asset, open-ended, unlisted fund with a limited monthly liquidity facility. The Fund has daily applications and unit pricing. Distributions are paid monthly and the property exposure is via the unlisted property funds and also via direct property assets. We're pleased to say that investment inflows have been progressively and consistently increasing with assets under management recently exceeding $100 million.

Jessica Amir: Great. Thanks Doug. Now let's dive into the portfolio in more detail. What can you tell us?

Doug Hoskins: Yeah, I might break that answer up into three parts. First of all about the tenants, then the properties, and then in the general portfolio metrics. When combining the direct properties and the unlisted syndicates held by the Fund, the Fund income profile is spread across around about 140 tenants. The income of the Fund is underwritten by high, credit-worthy tenants. For example, seven of our top 10 tenants are government-based with the other main tenants, including Optus and Bendigo Bank (ASX:ABC). Centuria is a highly experienced manager and we pride ourselves on strong tenant relationships, which often means we retain tenants and attract tenants to our buildings. This means the Fund is able to provide investors a secure and consistent income stream.

So moving onto properties now, I'll look at the unlisted syndicates first. Our unlisted syndicates are invested predominantly in commercial office properties. Their holdings are geographically diverse. For example, in New South Wales we have investments in Sydney's North Shore, Parramattta and City Fringe. In Queensland, we have the Energex building in Nundah. In Victoria, we have the Transport Accident Commission in Geelong, and in Western Australia, we a healthcare facility.

From the direct properties, we have a property in 10 Moore Street, which we recently purchased. It's a six-level office building in Canberra's Civic precinct. It's 100 per cent occupied with a 4.2 year WALE and the property has 14 tenants, some of which have been in the building for over 25 years and it's one of the very few buildings in the Civic precinct that has a five-star neighbours energy rating.

The second direct property that the Fund owns is at 381 Macarthur Avenue in Hamilton, Queensland. So that's located within Brisbane's North Shore Office precinct. It's a three-level, a grade office building, which was recently developed in April 2018. The property is, again, multi-tenanted, 100 per cent occupied and has a 4.9 year WALE.

Finally, generic portfolio metrics. From a portfolio perspective, the metrics are quite compelling. We hold investments either directly via the unlisted syndicates or via direct property acquisitions in 15 properties, and again, our income stream is spread around about 140 tenants. Our top 10 tenants are government-based or high-credit worthy. We have a 5.4 year WALE and a 99.8 per cent occupancy.

Jessica Amir: Thanks Doug. Moving on, we've seen interest rates cut to all time lows. What effect is this having on the portfolio?

Doug Hoskins: In early July, the RBA cut the official cash rate once again for the second month in a row, which means that we've got a record low rate of 1 per cent. This rate cut was generally anticipated by economists with a further rate cut in the next six months, a real possibility. Given the long-term cash rate of about 4.9 per cent, the current cash rate highlights the need for alternate investment opportunities to generate that high return to investors, which in my view is pushing investment appetite towards the property sector.

The Fund has seen consistent increasing inflows. This can be at least partially attributed to this very low cash rate environment. In addition, we've been seeing increased competition for quality property assets over the last six months, which means commercial property cap rates could compress further when compared to six months ago.

Jessica Amir: Well, it's great news for you guys. And just lastly before we let you go, is there anything you wanted to add today, Doug?

Doug Hoskins: Sure, Jess. The property sector remains an attractive asset class. The Diversified Fund offers monthly distributions and some very compelling investment metrics. This combined with the limited liquidity facility makes it an attractive investment opportunity.

Centuria (ASX:CNI) is a highly experienced fund manager with over 20 years experience in this sector. I encourage investors to contact Centuria if they have any questions about the Fund or any of Centuria's other products.

Jessica Amir: Wonderful. Well, Doug Hoskins, thank you so much for your time and looking forward to the next update

Doug Hoskins: Thanks, Jess.

Jessica Amir: And thank you for watching.


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