Primewest have added a new dimension to their investment offering with the launch of their first open-ended, unlisted wholesale fund – Primewest Property Income Fund (PPIF).
The fund has been established to provide investors with a more flexible investment product where Investors can, subject to liquidity, cash in their investment on a monthly basis. It will also provide unitholders with stable monthly income with the potential for capital growth.
The Fund’s primary focus is to invest in a diversified portfolio of property assets with defensive income characteristics (70% – 90% target allocation) across the office, industrial and logistics, social infrastructure and retail sectors. Properties may be owned directly by the Fund or indirectly via units in other property funds. The Fund may also invest in A-REITs (up to 10% target allocation) and cash products (up to 10% target allocation) to support the Fund’s liquidity requirements.
The Fund is being launched with an initial portfolio of three Childcare assets located in Robina QLD, Ellenbrook WA and Elizabeth Vale SA. The 3 Centres have a combined value of $17.5M with a WALE of 18 years.
The Fund will have a target gearing of 35% – 50% with a maximum of 55% on any single property. As a result, the Fund is seeking an initial capital raising of $13.9M and has targeted a distribution yield of 5.5% pa.
Core Property have provided a Research Report on the Fund and estimates the Fund to deliver an Internal Rate of Return (IRR) of between 7.0% – 9.3% (midpoint 8.1% p.a.) after fees, based on a +/- 25 bps sensitivity to terminal capitalisation rates over an assumed five year term.
The base case IRR assumes of 8.1% assumes an terminal cap rate of 6.29%, as compared to the Fund’s Weighted Average Cap Rate on acquisition of 6.16%.
According to Burgess Rawson, the national average cap rate for Child Care Centres has sharpened by 70bps over the past 12 months to 5.63%.
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