Tony Pitt’s boutique funds manager 360 Capital Group has taken a stake in a rival industrial property fund in a move that could signal the start of a new bout of consolidation in the Australian real estate investment trust sector.
The split between very large players like Goodman Group, Dexus Property Group and Stockland, against the raft of small industrial trusts could begin to close as investors demand small vehicles bulk up.
The Sydney-based fund manager, which runs its own $501 million 360 Capital Industrial Fund, has just snapped up a 7.7 per cent stake in competitor trust, the Australian Industrial REIT, that has a $308m portfolio and is run by Allan Fife’s property house.
The 360 Capital Group recently lifted its earnings and distribution guidance for 2015 and unveiled plans to transform into a pure fund manager that co-invests in the vehicles it manages.
Managing director Mr Pitt is also known for making corporate plays, and grew a large funds business when he was formerly at Mirvac Group, and he has flagged plans to expand his 360 Capital.
Mr Fife’s fund is his first foray into listed markets but he is a well-regarded corporate adviser and active in apartment development and private funds.
Both funds, along with the APN Property Group-run Industrial REIT, were part of a wave of new trusts that burst on to the ASX in late 2013.
The trusts have performed well but investors have tipped mergers among the small vehicles as greater scale could allow them to buy the larger portfolios and assets that have come to dominate the industrial market.
The Fife-run Australian Industrial REIT tapped the market earlier this year in a raising that saw it bulk up to 16 industrial properties with a focus on logistics and distribution centres.
The Pitt-run 360 Capital Industrial Fund is well positioned for any corporate activity after last month unveiling a 4.2 per cent upgrade to its fiscal 2015 distributions on the back of high occupancy levels.
The fund bought a $27m property in Murarrie, Queensland in a deal brokered by Colliers International, and industry sources suggest the trust has more properties in the state are under review. The 360 fund’s portfolio now sits at 21 properties worth $501.6m and it is geared at 44 per cent.
This article first appeared in The Australian Business Review.