360 Capital Total Return Fund
investment portfolio summary
In line with its broad investment strategy the Fund has made a number of strategic investment decisions.
During FY16, the Fund successfully negotiated the sale of the French Forest properties for $26.0 million and subsequently completed the sale with settlement occurring on 30 September 2015.
Strategic fund investment
The Fund has made a strategic investment in Industria REIT (ASX:IDR) which has a $400.0 million portfolio of commercial property assets.
As at 24 August 2016, TOT's investment in IDR stood at 14.7% or $38.7 million, compared to an acquisition costs of $36.5 million.
Based on its outlook for the market, the Fund is expecting capital appreciation within the investment’s property assets as well as improved leasing and occupancy.
- The Fund believes that IDR is undervalued and expects further consolidation in the AREIT sector.
- Given IDR’s last reported WACR of 7.62% and WALE of 5.0 years, sales evidence supports an increase in valuation from tightening yields.
- Positive leasing activity would be expected to lead to increased valuation/increase in trading price.
- TOT is now the second largest Securityholder in IDR.
- IDR has underperformed the AREIT index since listing; however, given TOT’s entry price, the investment has met TOT’s total return hurdle
- IDR provided FY17 guidance of Earnings: 17.5 - 17.7cps (FY16: 17.5 cps) and Distributions: 15.6 cps (FY16: 15.5 cps)
- TOT is well positioned to capitalise on the ongoing M&A activity in the AREIT sector.
Mezzanine loan investment
During FY16, the Fund undertook due diligence on a mezzanine loan investment opportunity however it did not proceed.