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Betting on ‘boring’

This article originally appeared in Courier Mail.

Investors drawn to low-key commercial assets

Property floats and capital raisings are storming back with more than $1bn of equity raised in a spate of deal-making over recent weeks.

In the latest play, property company Real Asset Management Group raised $357m for a new essential services fund, focused on neighbourhood shopping centres and medical assets, with both areas tipped to grow.

Centuria Capital fund recently raised $300m to buy eight warehouses and Industria REIT tapped the market for $350m as it bought assets including a slice of Perth’s Jandakot Airport.

The new RAM Essential Services Property Fund will list this month with a market capitalisation of $521.1m after completing a bookbuild last week.

It will initially own 33 properties worth $706.3m and the expected investment yield for investors is 5.7 per cent.

But that is expected to grow as both areas are taking off and the properties have in-built growth opportunities via a value-add development pipeline on the portfolio’s existing assets.

Its most valuable properties include the Coomera Square Shopping Centre in Queensland and Mayo Private Hospital in New South Wales.

RAM Australia chief executive Scott Kelly said the listed fund would give investors unique exposure to high-quality medical real estate, an asset class that is just emerging on the ASX, as well as essential retail assets, both of which are 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 impacted non-essential sectors,” he said.

“The fund will be actively managed and grow through both additional investments in medical space and the low-risk development pipeline.”

Mr Kelly quipped that the fund specialised in “boring” assets and had been buying non-discretionary retail centres for years.

They now suited investor requirements more than ever, he said.

“In a post-Covid environment with record-low interest rates and an ageing population, people are just desperately yearning for yield,” Mr Kelly said.

RAM head of real estate Will Gray predicted a boom in small centres had years to run as more capital tried to get into the area and the medical side would also grow.

“I think the healthcare space is going to attract a lot of demand,” he said, noting investors were rebalancing out of CBD offices and larger retail assets.

The fund board includes property industry veterans Greg Miles and Bryce Mitchelson along with ex-CBA executive Marianne Perkovic as non-executive directors.