Castlerock to Raise $90m for Existing Fund1 July 2021
Castlerock has re-opened its Auslink Property Trust No 2 Fund to raise $90m for its latest acquisition.
Castlerock is a funds manager and full-service property group with more than 18 years experience delivering with a focus on delivering their investors predictable returns by taking a long-term view of asset development and management.
The existing Auslink Property Trust No 2 Fund was established in 2014 with the objective of building a portfolio of Commonwealth and State Government leased assets located throughout Australia to provide investors with a stable and growing income stream, and long term capital growth. To date, the Fund has invested in 10 assets in Australia and generated a return of 12.5% per annum.
Castlerock seek to add value by acquiring, developing and managing assets underpinned by key performance indicators such as high occupancy rates and excellent tenant retention. Castlerock seek to work with State and Federal Governments to assist them in their long term plans achieve fit-for-purpose buildings tailored to their needs. To date, the Group have more than 35 government-leased properties in the our portfolio, in regional and suburban locations as geographically diverse as Port Hedland and Hobart.
The forecast distribution for the Fund is 7.2% per annum (annualised) for the financial year ended 30 June 2022.
See our previous article on their latest acquisiton;
|Responsible Entity||Castlerock Funds Management Limited|
|Fund Manager||Castlerock Funds Management Limited|
|Current Fund Size||$330M|
|Fund Raising Target||$90M|
|Fund Open||1 July 2021|
|Fund Raising Close||31 October 2021|
|Fund Term||5 years|
|Forecast Distribution||Forecast distribution rate of 7.2% per annum (annualised) for the|
financial year ended 30 June 2022, paid quarterly
|Target Return||No guidance given|
|Investor Type||Wholesale & Retail|
|Existing Assets||445 Flinders Street, Townsville|
45 Kembla Street, Wollongong
29 Lockwood Rd, Kangaroo Flat
65 Church Street, Morwell
20 Charles Street, Launceston
44 Nelson Street, Mackay
2a Barries Rd, Melton
5 Milldale Way, Mirrabooka
22 Hamilton Rd, South Hedland
12 Queen Street, Warragul
|Target Assets||117 Brisbane Street, Ipswich|
The strategy of the Trust is to purchase and/or develop a portfolio of Commonwealth and State Government-leased assets with the objective of providing stable income distributions, and the potential for capital growth in the long term. The assets in the Trust will primarily be leased to the Commonwealth and State Governments of Australia. The Fund may develop assets but only if they are pre-secured by lease to Government agencies, have a development proposal approved by the Responsible Entity’s Board; and where debt funding does not exceed the Fund mandates.
The Fund is an existing Fund with 10 assets valued at $342.25m with investments diversified across New South Wales, Victoria, Queensland, Tasmania and Western Australia. The Fund is in the process of acquiring an 11th asset in Ipswich for $145.2 million and is seeking to raise up to $90 million in equity for that purchase.
The Unit Price under the current offer is $1.36 per unit which compares to the forecast Net Tangible Assets of the Fund (post acquisition) of $1.24 per unit. The excess price is intended to cover the fees and costs of acquisition.
The Fund is an open ended unlisted fund with a limited annual liquidity option and a 5-yearly exit events for investors who wish to redeem their investment. The annual liquidity option is limited to 2.5% of the value of the net investments of the Fund. At each 5 year period, from and including February 2026, the fund will provide an opportunity for investors to redeem their units (“Periodic Exit Opportunity”). To facilitate the exit, the Manager will communicate with investors with respect to the liquidity strategy including the forecast price that investors may receive. The fund may then sell assets, increase debt, raise new equity or provide a matching facility to existing investors. The ability to withdraw an investment in whole or in part is therefore not guaranteed and subject to timing and value risks.
The Responsible Entity is entitled to the following fees from the Trust:
- a Development Fee/Acquisition Fee: 2.675% of the completed value of each real property asset developed or acquired by the Trust or any controlled sub-trust.
- a Funds Management Fee: 0.85% per annum of the gross asset value of the Trust
- a Performance fee: Equal to 20% of the amount by which the internal rate of return (IRR) of the Trust exceeds 11% p.a. over the period February 2014 to February 2026, and every 10 years thereafter, and if the Responsible Entity is removed or retires.
- a Disposal fee: 1% of the gross sale price of the assets.
In addition, the Responsible Entity is entitled to pay or recover from the Trust administration costs properly incurred in the operation of the Trust.
The upfront fees on the higher side of similar offers, however the performance hurdle is lower than comparative funds.
The Fund is recommended for further consideration by investors seeking an average distribution yield from long term Government back tenants. Capital growth from the assets in the fund are expected to be under pinned by increase rents which are secured under lease arrangements. An increase in interest rates could impact the net income from the assets and the potential valuation capitalisation rate at the time of sale and as such there is some risk to capital growth. Potential investors are advised to review the key risks in the product documentation and undertake a detailed assessment of the portfolio and investment cash flows.
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