A VULTURE fund set up to swoop on ailing listed property companies says it can generate returns of 18% a year or more over its three-year life.
Sydney fund manager Pengana Capital yesterday launched the Opportunistic Listed Property Strategy to capitalise on merger and acquisition opportunities in the listed property trust sector, which has lost about 30% in value since November.
The fund aims to invest $200-$300 million over three years.
Companies in the S&P/ASX 200 Property Trust Index recorded 4.5% growth in distributions per security last financial year, down from 6% in 2005-06.
Manager Tim Shaw said now was the time for investors to act. "The fall in Australian property stocks reflects, among other things, falling asset values and associated income and the resultant potential breaches of debt covenants," he said. "We believe there will be a significant number of merger and acquisition opportunities."
He refused to specify which companies the fund was likely to target.
But he said the external funds management model, used by troubled property companies such as Centro Properties Group, Allco, Rubicon and MFS Limited, now known as Octaviar, was under a lot of pressure, and that unlisted capital was likely to play a more prominent role.
Associate director of Property Investment Research, Dugald Higgins, said a lot of opportunistic activity was "in the wings", but this was the first fund he had heard of explicitly preying on the sector. He said it was difficult to know whether a three-year closed fund was prudent. "The property trust sector on our last analysis was trading at about 15% discount to our valuation," he said.
"But are we actually at the bottom? What happens if the slump goes longer than three years?"
The launch of the Pengana fund coincided with a statement by one of the sector's worst performers, Centro Properties Group.
The company played down a report that it had received recapitalisation bids of about 90¢ a share by reiterating it was talking with "a number of parties" but "there is no certainty or assurance that these discussions will lead to a transaction".
The company said it was still in talks to get its third extension on $4 billion debt due on April 30.
Centro shares closed at $0.425, down 0.005¢ or 1.19%.
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