WHILE many resource companies have gone through the Australian Stock Exchange doors via an initial public offering, investors increasingly have the opportunity to use the stock market to take part in property investment.
Kareelya Investment Limited has issued a $6 million product disclosure document for a managed investment scheme called Westralia Property Trust, which has been operating since May 2001.
The trust has a portfolio of investments in property syndicates and trusts, as well as one special-purpose property development company and a lending arm slanted toward the tourism sector.
Kareelya has been a long-time manager of managed investment schemes with the Westralia Property Trust its 11th scheme. Investors in other schemes operated by Kareelya will be able to exchange their units under a securities swap facility. If the 33 per cent IPO of the trust is fully subscribed it will have a total equity of $18 million.
The amount of money raised that will find its way to a property or securities investment will vary between $285,000 if the minimum of $2 million is raised to approximately $2 million if $6 million is raised.
Repayment of existing debt created by the trust will take precedence, however. At the $2 million minimum subscription, half will be used to repay debt while almost $3 million will go to debt if the maximum subscription is realised.
The offer is expected to close on March 4 with listing expected to follow on March 14.
Besides its investment in the Dunsborough Beach Resort, The Kalgoorlie Broadwater Apartment Hotel (under construction), the Swanview Development, Broadwater Busselton and the Pagoda Hotel and Apartments, the trust also has an option to purchase all the units in the Bunbury Silos Property Trust that is developing the Bunbury Silo project.
Stage one of the $33 million Bunbury Silo project is already well under way and comprises a retail centre and 18 residential apartments.
The trust also has the opportunity to invest in the commercial offices and retail section of the Swanview development through an investment in the Swanview Property Trust.
Yet in its forecasts, Kareelya attributes all of its initial income from assets originating from the lease of the Dunsborough Beach Resort to Dunsborough Hotel Management Pty Ltd.
In the period from November 1 2002 to June 30 2003, income from this source will equal $360,000, according to company forecasts, while an additional $480,000 will be derived from interest income largely from mortgaged debentures and its loan book.
Management fees of $27,000 during the eight-month forecast period, together with responsible entity fees of $77,000 as well as $319,000 in interest and finance expenses will contribute to a write-down of revenue, resulting in a net operating profit of $299,000. This compares to a $1 million-plus net loss for the year to June 30 2002.
Property trusts have had varying success over the past year.
However, a list of property trusts compiled for WA Business News (see page 34) by Property Investment Research shows that those related to tourism such as hotel and leisure trusts performed stronger than other sectors, with a current average yield of more than 9 per cent.
This compares with average yields for retail trusts of around 7.35 per cent, commercial trusts of under 8 per cent and diversified property trusts with yields approaching 6.5 per cent.
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