Australian owned wealth and asset manager Real Asset Management Group (RAM) today launched what will be its first Real Estate Investment Trust, the RAM Essential Services Property Fund.
A Product Disclosure Statement for the Fund, which will have an expected market capitalisation of $521.1 million, was lodged with ASIC this afternoon. The Fund is scheduled to list on the ASX at the end of October and will have the ticker code REP.
The objective of the listed RAM Essential Services Property Fund is to provide investors stable and secure income with the potential for both income and capital growth through exposure to a defensive portfolio of high quality Australian medical and essential retail real estate assets.
The Fund will initially own 33 properties worth $706.3 million at a 5.85% weighted average capitalisation rate and 7.1 year weighted average lease expiry. The expected investment yield for investors is 5.7%, based on FY22 forecasts and the offer price of $1 per security.
The Fund portfolio is split almost 50/50 between essential retail and medical assets and is diversified across five states and the Northern Territory. Its biggest tenants include private hospitals group HealtheCare and supermarket companies Coles and Woolworths. The portfolio offers inbuilt growth opportunities through a significant and activated value-add development pipeline on the portfolio’s existing assets.
Its most valuable properties include the Coomera Square Shopping Centre in Queensland valued at $76.8 million which counts Woolworths and Dan Murphy’s as cornerstone tenants and Mayo Private Hospital valued at $48.0 million, which is 100% occupied and operated by HealtheCare.
The RAM Group has a dedicated real estate asset management team of 15 real estate professionals who have a proven track record of sourcing investment opportunities, including 36 real estate transactions worth more than $900 million over the last five years in Australia.
RAM Australia CEO Scott Kelly said the listed RAM Essential Services Property Fund would give investors unique exposure to high quality medical real estate, an asset class that is currently difficult to access for ASX investors, as well as essential retail assets, both of which were supported by favourable longer-term trends.
“The strong defensive income profile of the Fund was highlighted by strong tenant cash collections during the COVID crisis which severely impact non-essential sectors. Through the worst part of the COVID disruption in 2020 we maintained 92% of cash collections and this returned to 98% in the following quarter.
“The fund will be actively managed and grow through both additional investments in medical space and the low-risk development pipeline, with a focus on assets that are predominantly leased to tenants with strong covenants on long-term leases,” Mr Kelly added.
The fund with be overseen by a Board of the highest calibre with property industry veterans Greg Miles and Bryce Mitchelson along with ex CBA executive Marianne Perkovic as non-executive directors. Mr Kelly and RAM Group CEO Scott Wehl will both be executive directors. Credit Suisse and UBS are underwriting the offer while Ord Minnett and E&P Corporate Advisory are joint lead managers.