APN’s latest direct property fund, the APN Nowra Property Fund, isn’t the most glamorous piece of real estate going around. No offence to the architect or the builder, but we don’t expect it to win any architectural awards! We also doubt that it will deliver the sorts of interstellar stock market returns that we are seeing from some of the latest and greatest tech companies.
The saying ‘all that glitters is not gold’ we think applies in reverse. Some great investments have been ho-hum in the glamour stakes. A few funds that we set up a couple of years back held assets that weren’t much to look at but generated great returns for our investors. A bit boring, a bit ugly, but very effective at delivering investment performance which is of course at the end of the day what we really care about.
While perhaps an ugly duckling, what the APN Nowra Property Fund should deliver is a strong and growing cash yield with income growth and potential capital growth – and an attractive entry price when considering the risk you are taking with your capital.
The forecast cash yield is 7.8% in FY2019, with 90% tax deferred. The rent is guaranteed by ASX listed Woolworths Limited for 13 years, and the Fund’s Net Tangible Asset (NTA) is $1.05 which is unusual for a syndicate. This is because APN is contributing the property to the Fund at a small discount to the property’s independent valuation (with a higher performance fee at the conclusion of the Fund if investors are delivered a successful outcome). The cap rate on the property is 7.25%.
The property itself is located in Nowra on the NSW Coast which has a growing regional population of 100,000 people and is benefiting from significant infrastructure investment in the broader region. The property has 13,000 sqm of space – the rent equates to a modest rate of $135 per square metre per annum.
At this juncture we should point out that the Fund is available only to sophisticated investors and that returns are not guaranteed. There are of course risks involved with all investments as well as some specific ones that relate to an unlisted single asset fund. These risks are outlined in the Information Memorandum.
That said in our view an 7.8% cash yield (FY19 forecast) with a guaranteed lease from Woolworths is an excellent opportunity in the current environment.
If you’re after a ‘beautiful’ investment we appreciate this may not be for you. But if you find the Fund appealing for other reasons then please feel free to give us a call on 1800 996 456 or email me at firstname.lastname@example.org.