It is seven years since the depth of the GFC. The Federal Reserve recently raised interest rates having spent the last seven years, along with other Central Bankers, implementing growth strategies. Markets remain unconvinced of the efficacy of those strategies, concerned about the emergence of China and the stagnation in Europe.
It is time to keep your head whilst others around you lose theirs.
Volatility is a euphemism for downward movements and there are plenty of downward movements over the past few years, wages, interest rates, oil, currencies. Should we be fighting the Fed? Is there incipient inflation in the wings? We are steadfastly in the lower for longer camp. If so, only two investments possess a growth opportunity in this environment: equities and property; and equities are more volatile.
At APN we are concerned not to lose money, so whilst the entry point is of paramount importance our mantra; property for income is of greater import. We are far more concerned, in this environment, with the sustainability and quality of income streams. Think about the publican pulling beers, the farmer on his land, the home owner making mortgage repayments rather than paying rent. All these parties are generating income, synthetic rents, so as to patiently hold their property. When capital gains come they are welcome rather than expected. If ever there was a time to invest patiently in property for income that time is now. Excessive debt in all our opportunities will be eschewed.
APN has weathered the GFC and grown its Funds Under Management substantially during the past three years. Our market leading AREIT Fund established at the depths now exceeds $1 billion and is currently yielding 6.2%* with a significant percentage of tax advantage income. Our listed healthcare Fund, Generation Healthcare REIT (GHC), has been an outstanding performer in the listed REIT space. Industria REIT (IDR), an APN managed REIT in the industrial and office/technology park space, is yielding approximately 7.5% with a five year WALE (weighted average lease expiry) and attractive relative valuation metrics. We are particularly proud of our team’s leasing effort.
This year we are launching the APN Convenience Retail Property Fund, an unlisted direct fund which is an alternative to the APN AREIT Fund and has a forecast headline yield circling 7%. The volatility in equities and investment markets should create buying opportunities in Australia. If you are wishing for stable long term returns, contact us to find out more about this opportunity. This is a major focus for APN in 2016.
Finally, I would like to recommend you consider our Asian REIT Fund, one of the products within our existing securities platform. This Fund has delivered attractive returns but is largely overlooked. Going forward it’s an excellent income product with strong underlying growth prospects. The Asian REIT Fund only invests in leading Asian Real Estate entities which are subject to industry focussed governance regimes. Australia within and outside its borders will become more Asian. The dynamics of the past eight decades of American dominance are changing rapidly. We will, by necessity, need a new defined position within the region. China will likely control our sphere of influence and some three billion people will be seeking prosperity. The Asian REIT Fund is a product for the present and future.
APN invites you to invest alongside it in property and its property products in a time where income, exacerbated by an ageing population, will be important. We are a young team with an eye to the future but with a very experienced Board providing common sense guidelines for capital preservation.
*As at 16 February 2016. Current running yield is calculated daily by dividing the annualised distribution rate by the latest entry unit price. Distributions may include a capital gains component. Past performance is not an indicator of future returns.