Combined Property
Combined Property Income Fund Update
September Quarter 2008
This update is for the BlackRock Combined Property Income Fund (Aust) (formerly known as the Merrill Lynch Combined Property Income Fund).
The performance shown in the Fund Update is the net performance of the fund. To view the net performance of the fund or of the different unit classes of the fund download the Fund Performance Report or visit Fund Performance.
Gross performance returns and benchmark performance shown do not include expenses, fees or tax. Net performance returns are prepared on an exit-to-exit fee basis which includes all ongoing fees and expenses.
Volatile conditions across global financial markets have created significant uncertainty across all investment markets including real estate. The cost of debt and equity for Australian REIT's has increased significantly this year. These effects, combined with the expected onset of slower economic conditions, will continue to affect real estate pricing. As the ability of investors to access both debt and equity becomes increasingly difficult and costly, there are reduced numbers of buyers of property able to participate in the market.
Positive Influences on Performance
Property
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Previous Valuation
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Current Valuation
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% Change
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60 Holbeche Road, Arndell Park, Sydney
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$20,500,000
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$21,700,000
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5.9%
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Rosemeadow Marketplace, Sydney
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$15,800,000
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$16,000,000
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1.3%
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34–42 Sheppard Street, Hume, Canberra
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$13,900,000
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$14,000,000
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0.7%
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Negative Influences on Performance
Property
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Previous Valuation
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Current Valuation
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% Change
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310 Barrack Street, Sydney
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$77,300,000
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$72,600,000
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(6.1%)
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883 Whitehorse Road, Box Hill, Melbourne
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$26,500,000
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$24,500,000
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(7.5%)
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31–33 Maddox Street, Alexandria
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$61,000,000
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$58,750,000
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(3.7%)
|
sd
Unlisted Investments
- The BRPT currently has six investments in unlisted property funds. These investments are made to enhance the diversification of the Trust, complement our direct exposure, and capitalise on pricing arbitrages.
- While five of the six investments continue to perform in line with, or exceed, our expectations, the Centro Direct Property Fund (Centro DPF) remains closed to applications and redemptions.
Recent Sales
- The settlement of 34 Corporate Drive, Cannon Hill, for $13.2m, occurred on 30 September, 2008. The sale is a pleasing result given current market conditions and the distinct lack of buyers. With an original purchase price of $10.4m plus costs, the result is highly satisfactory.
Trust Activity
- Our leasing team continues to witness solid rental growth across most markets.
- Terms were agreed on a large number of leasing transactions during the quarter, with several tenants now in the process of executing final lease documentation.
For the BlackRock Property Securities Fund (Aust):
The BlackRock Combined Property Income Fund (Aust) invests into the BlackRock Property Securities Fund (Aust).
- The Australian listed property sector experienced extraordinary volatility during the September quarter with 49 out of 66 trading days resulting in price movements of 1% or greater and an unprecedented number of large scale events occurring in a short space of time.
- In the wake of the financial turmoil, central banks globally injected a massive amount of liquidity into the system in attempt to ease the credit squeeze.
- One of the key events of the sector reporting season in August was that many trusts chose to rebase distribution policies to better align dividends with underlying operational cash flows. We see this move as a positive and will reduce debt funding needs for the sector moving forward and more closely aligns payout policies of Australian REITS to their offshore counterparts.
- Office was the best performing sub-sector over the quarter rising 11.1%.
- The retail sub-sector returned 5.0% also outperforming the broader sector. The diversified and industrial sub-sectors both underperformed significantly, returning -9.2% and -15.9% respectively.
Performance review of the Combined Property Income Fund
|
|
Gross
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Benchmark#
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Out-performance*
|
3 Month
|
-2.01%
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-0.45%
|
-1.56%
|
6 Month
|
-7.87%
|
-7.37%
|
-0.50%
|
1 Year
|
-19.54%
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-18.06%
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-1.48%
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2 Year (pa)
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-2.40%
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-0.80%
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-1.60%
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3 Year (pa)
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4.15%
|
6.28%
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-2.13%
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5 Year (pa)
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9.65%
|
10.68%
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-1.03%
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Past performance is not necessarily a guide to future performance.
Performance of Class D units. Inception date for the Fund is 25/08/2003.
#Performance benchmark figures (before fees and tax) are 50% Mercer Unlisted Property Funds Index and 50% S&P/ASX 200 Property Trust Accumulation Index.
*Shows the difference between Gross return and Benchmark return.
Long term performance returns show the potential volatility of returns over time. Gross performance figures quoted are calculated with no allowance for management fees, operating expenses or tax on income.
Performance review of the Property Trust
|
|
Gross
|
Benchmark#
|
Out-performance*
|
3 Month
|
-1.60%
|
-0.03%
|
-1.57%
|
6 Month
|
-1.75%
|
1.74%
|
-3.49%
|
1 Year
|
2.57%
|
10.29%
|
-7.72%
|
2 Year (pa)
|
10.56%
|
14.66%
|
-4.10%
|
3 Year (pa)
|
11.42%
|
15.85%
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-4.43%
|
5 Year (pa)
|
12.62%
|
14.57%
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-1.95%
|
Past performance is not necessarily a guide to future performance.
^ Inception date 30/6/1993
# Mercer Direct Property Index
* Shows the difference between Gross return and Benchmark return.
Long term performance returns show the potential volatility of returns over time. Gross performance figures quoted are calculated with no allowance for management fees, operating expenses or tax on income.
Performance review of the Property Securities Fund
|
|
Gross
|
Benchmark#
|
Out-performance*
|
3 Month
|
-2.73%
|
-1.26%
|
-1.47%
|
6 Month
|
-17.35%
|
-16.55%
|
-0.80%
|
1 Year
|
-42.24%
|
-40.44%
|
-1.80%
|
2 Year (pa)
|
-17.31%
|
-15.44%
|
-1.87%
|
3 Year (pa)
|
-5.22%
|
-3.51%
|
-1.71%
|
5 Year (pa)
|
5.12%
|
6.19%
|
-1.07%
|
Past performance is not necessarily a guide to future performance.
# S&P/ASX 200 A-REIT Accumulation Index.
* Shows the difference between Gross return and Benchmark return.
Long term performance returns show the potential volatility of returns over time. Gross performance figures quoted are calculated with no allowance for management fees, operating expenses or tax on income.
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Positive influences
|
|
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- Overweight positions in Macquarie Office Fund (+2.4%); and
- Underweight positions in Goodman Group (-21.4%), General Property Trust (-19.3%) and Mirvac (-16.2%).
|
|
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Negative influences
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|
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- Overweight positions in Becton Property Group (-63.4%), Reckson New York Property Trust (-51.8%); and
- Underweight positions in Commonwealth Property Office Fund (+16.6%) and Colonial First State Retail (+21.6%).
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Investment objective
The primary objective of the Fund is to deliver a combination of income and capital growth over the medium to long-term by investing in a portfolio of direct property and listed property securities, with an emphasis on income. The Fund aims to deliver an attractive income yield from both direct and listed property.
We aim to achieve this objective by outperforming the benchmark asset allocation returns over rolling five-year periods.
The Fund is actively managed against a passive benchmark, equally weighted between the following listed and direct property indices:
- 50% Mercer Unlisted Property Funds Index (before fees and tax).
- 50% S&P/ASX 200 A-REIT Accumulation Index.
Fund strategy
The investment objective of the Fund is currently pursued by investing in a portfolio of direct property and listed property securities. Exposure to direct property and listed property securities is obtained through related Funds managed by BlackRock – the BlackRock Property Trust and the BlackRock Property Securities Fund.
Designed for investors who…
- Seek a fund which aims to provide a regular income stream from a diversified portfolio of direct property and listed property securities.
- Seek growth over the long term.
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