Retail shopping centres – stable income returns

Date: 15 October 2020 | Australian Unity

Neighbourhood and convenience retail shopping centres - anchored by supermarket and essential services – have proven to be a resilient asset class. The unprecedented COVID-19 pandemic has further cemented the resilience of this sector, with increased demand for essential goods and services being sought due to the restrictions set out by State governments in response to COVID-19. Convenience i.e. shopping local - has become the new normal and neighborhood supermarkets, pharmacies, specialist food retailers, banks and retailers with good omni channels are generally witnessing uplifts in turnover and footfall.

Our Diversified Property Fund (the Fund) owns a number of direct property assets that fall into these categories which have been pivotal in servicing the needs of our communities – from neighbourhood shopping centres to warehousing and distribution facilities servicing e-commerce.

The Fund’s existing portfolio includes nine properties and these have continued to deliver stable and consistent returns despite the current volatility. “This is attributable to the Fund’s strategy of acquiring defensive tenants that provide essential services including supermarkets, pharmacies, food retailing, e-commerce and refrigerated warehousing,” Nikki Panagopoulos, Fund Manager, explains.

“The Fund owns defensive income producing assets, many of which have been expanded and improved over the last five years in line with community demand, which has been an effective way to maintain consistent returns for investors.

As an example, neighborhood retail shopping centres anchored by supermarkets – to which the Fund is exposed – have proven to be a lifeline for the communities they serve particularly since March.”

Many investors value the stable and consistent income provided by the Fund, particularly those investors who are in retirement or preparing for retirement.

“One of the biggest challenges investors currently face is the scarcity of investment opportunities that can deliver consistent, solid returns relative to the risk involved. Unlisted property investments that give investors access to a stable income stream, such as those cemented by defensive essential services and consumer staples, make a lot of sense,” Ms Panagopoulos said.

When seeking regular income, unlisted property funds can be a useful addition to an investment portfolio. The chart below demonstrates the stability delivered by the Fund over a ten-year period.

3 mths% 1 yr% 3 yr% 5 yr% 7 yr% 10 yr%
Distribution return 3.59 9.01 7.95 8.28 8.36 8.27
Growth return 1.70 3.27 4.84 6.77 5.20 3.30
Total return 5.29 12.28 12.79 15.05 13.56 11.57
Benchmark distribution return 0.80 3.40 3.75 4.03 4.42 5.02
Benchmark total return (3.99) (2.66) 5.33 8.09 8.45 8.60

Performance as at 30 June 2020*

Current market conditions are also presenting compelling acquisition opportunities for the Fund, such as well-located industrial or office property with strong defensive covenants and long lease terms to further diversify the portfolio. For a limited time, the Fund is offering a 30% discount on the base management fee (Discount) for all investors who apply for units offered under the Fund’s PDS dated 8 October 2020. The Discount will be paid as a rebate in two cash payments in January 2022 and January 2023 respectively. Eligibility to receive these payments is subject to satisfying all of the conditions set out in the Fund’s PDS. Refer to the PDS for more information.

Important information

*Inception date for performance calculations is 22 August 2006. Returns are calculated after fees and expenses and assume the reinvestment of distributions. Past performance is not a reliable indicator of future performance. The Fund’s Benchmark distribution return is 1% p.a. above the average Commonwealth Government 10-year bond yield on a rolling basis over the previous five-year period. The Fund’s Benchmark total return is the MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index.

Units in this Fund are issued by Australian Unity Property Limited ABN 58 079 538 499, AFS Licence No 234455. Information provided here is general information only and current at the time of publication and does not take into account your objectives, financial situation or needs. In deciding whether to acquire, hold or dispose of the product you should obtain a copy of the Product Disclosure Statement (and any relevant Supplementary Product Disclosure Statement) and seek professional financial and taxation advice. This information is intended for recipients in Australia only. Past performance is not a reliable indicator of future performance.

Important information

The information provided here is of a general nature and is only intended for use by financial advisers and other licensed professionals and does not take into account individual objectives, financial situation or needs of any person. Before deciding to acquire any product or service mentioned, investors should read all applicable disclosure documents (such as financial services guides, terms of use and conditions, fees and charges and the relevant Product Disclosure Statements), which are available via the links provided or from our website.  You may also request a copy of any of the applicable disclosure documents. For more information, please contact us.