Specialist commercial property manager Stronghold Investment Management launched its first open ended fund offering yesterday designed to provide capital protection and income returns for SMSF investors.
The Stronghold Precincts Property Fund is looking to attract SMSF investors offering them access to a portfolio of commercial properties, which may include service warehouse and/or retail premises, located outside the central business district of Australian capital cities, underpinned by transport infrastructure.
The fund has been established with two properties valued at approximately $25 million, housing four tenants in total with an occupancy rate of 92 per cent.
“Our current distributable cashflow is 7 per cent. Things that will change that are new acquisitions because the cost of getting into property is expensive, but we’re starting at 7 per cent,” Stronghold head of finance Bruce Anderson told selfmanagedsuper.
The minimum investment amount for the Stronghold Precincts Property Fund is $25,000 and only open to wholesale or sophisticated investors, and distributions will be paid quarterly, as will fund redemptions.
Stronghold is recommending SMSF members invest in the offering for a minimum of five years.
“We recommend five years because ultimately what we are trying to achieve for investors is sustainable monthly cash returns but also long-term capital protection,” Stronghold fund manager Tim Dundson explained.
“This five year timeframe coincides with the cost of acquiring properties which we write off over a five year period.”
At launch the fund portfolio will have a 90 per cent allocation to direct property, a 5 per cent allocation to indirect properties through unlisted trusts, and another 5 per cent in cash, cash equivalents and Australian Securities Exchange listed Australian real estate investment trusts or A-REITs.
Once the fund is considered to be established, that is with over $400 million in funds under management, the portfolio weightings will shift to having 60 per cent in direct commercial properties, 25 per cent in indirect properties and 15 per cent in liquid assets such as cash or cash equivalents.