New fund wants young investors
Small and young investors are the target of a new commercial property fund offering a minimum $1000 investment rather than the usual $10,000 minimum.
This small an investment is uncommon in the commercial property world, where typically syndicated property or shared property ownership schemes require a minimum of $10,000 and allow increases of
$1000 at a time. They often attract older people with money accumulated over a working lifetime.
There are also shared property ownership schemes that only want wealthy, knowledgeable and experienced investors and often require a minimum of $50,00 to
$100,000, while some even require $750,000 to $1 million.
But property funds manager PMG Property Funds Management, based in Tauranga, is launching a new fund, PMG Generation Fund, aimed at small investors and the younger generation.
The fund is buying three industrial properties, one each in Wellington, Christchurch and Hamilton, for $52.9m, and is aiming to raise $33m from investors to partly pay for the buildings.
PMG plans to issue 33 million units costing $1 each with a minimum investment of $1000. It is targeting a pre-tax return of 5.8c a unit, higher than the return on term deposits at present.
PMG chief executive Scott McKenzie said PMG wanted to lower the barriers to investing in commercial properties and attract multi-generations to invest, not just older people. That was part of the reason it was called PMG Generation Fund.
Residential property was becoming out of the reach of the next generation but commercial property was a productive asset and the next generation could take part in its benefits.
PMG had invested heavily in technology to enable investors in PMG Generation Fund to daily track the investment. For the new generation of investors, being able to access the information online was very important.
McKenzie said other property managers had competing investments in the market and PMG was finding
The returns from industrial property were good, including income from the property as well as capital gain.
Martin Hawes, above
investors were asking about the quality of the building and the track record of the manager, which was great, he said.
In time, PMG also wanted investors to be able to invest small amounts often in the fund and to be able to reinvest their monthly cash income in more units if they wanted, McKenzie said. To do that PMG had to apply to the Financial Markets Authority for variations to its existing licence so it could be a ‘‘continuous issuer’’.
Financial adviser and author Martin Hawes said KiwiSaver was the best thing for young people saving for a house, making sure they were getting the full amount from the Government and their employer.
But if they were looking beyond that and interested in investing, his favourite asset class for several reasons was commercial property (office, industrial and retail properties) and industrial property in particular.
Industrial properties were simpler buildings and their designs were not subject to changes in fashion. Few became obsolete and they were usually tenanted by practical business people who paid their rent on time and fulfilled their obligations as tenants.