Oyster Group is set to launch a new unlisted property investment fund to be called the Oyster Direct Property Fund that will allow participants the chance to invest in a diversified portfolio of commercial properties throughout New Zealand worth $240 million.
Mark Schiele, CEO of Oyster, says the new fund is designed to satisfy market demand for a property investment vehicle capable of providing monthly income for investors.
"It aims to provide investors with a monthly tax advantaged income stream combined with the potential for capital growth," Schiele says.
He says the fund will be structured for monthly liquidity after its first year in operation and will be a Portfolio Investment Entity (PIE) structure requiring a relatively affordable minimum investment of $10,000 with distributions payable monthly.
"The diversified fund will invest in a range of premium commercial property spanning retail, office and industrial assets of significant value and scale that are located in major urban locations and have long lease terms and quality tenant covenants.
"To begin with, we will be seeking to raise a modest $15 million of investor equity. However the intention is to grow the fund progressively in order to allow investors continuous opportunities to invest."
Schiele says the fund will invest in existing Oyster commercial property syndicates and growth will be achieved by purchasing further interests within new schemes and through the fund purchasing its own direct property.
"The Oyster Direct Property Fund will present an ideal opportunity to invest across all sectors of commercial property. Initially the fund will invest in a variety of high profile properties including a number of Countdown supermarkets, Mitre 10 MEGA Henderson, the New Zealand Racing Board Head Office Petone, the Home Straight Business Park Hamilton, the Westpac building in Corinthian Drive Albany, and the VIP Packaging industrial facility in Harris Road East Tamaki.
"As well as offering a tax-advantaged income stream and monthly income distributions, the Oyster Direct Property Fund will offer investors an opportunity to diversify their commercial real estate portfolio by geography, property type and tenants.
"With the official cash rate currently sitting at 2.5 per cent and projected to remain at historically low levels for some time, we expect that interest in a property fund providing an attractive yield from a mix of assets will be very high from both current and new investors."
Schiele says Oyster Group will be able to disclose the exact composition of the fund and projected monthly income returns when its Product Disclosure Statement is released next month.
"There is strong investor appetite for different commercial property investment opportunities which offer long term gains in both income and value," he says.
"Investors are seeking alternative options for income and they are aware commercial property is one sector that can provide relatively high income yields. In addition, diversifying risk across a number of properties is something many of our investors have seen as desirable so Oyster has adapted and grown its suite of products to accommodate."
He says this remains particularly important for new investors who may have a comparatively modest level of capital to invest.
"We continue to want participation in commercial property ownership to be achievable for as many investors as possible and, with a relatively low minimum entry level, we expect the Oyster Direct Property Fund to have wide appeal."
Oyster's public equity raises last year were seized by investors in record time. Its recent proportionate ownership opportunity of the $23 million Home Straight Business Park at Te Rapa Road in Hamilton closed, over-subscribed, within a week of its release to the public. It was Oyster's third syndication with a reduced minimum investment level of $50,000.
The group was also recently notified that it is one of the first in the commercial property industry to be granted a Managed Investment Scheme licence by the Financial Markets Authority. Schiele believes the requirement for all managers of investment products to be licenced is a major step up in the regulation of the financial markets.
"The hurdle to licencing is set high and this will weed out those operators who don't have the skills, staff and robust processes required to be a licenced manager. This can only improve our financial markets and increase the quality of the managers which remain."