Quintessential in $150m raising


    Boutique fund manager Quintessential Equity is preparing to launch a $150 million raising for a fresh fund to acquire commercial property, tapping into investor appetite for real estate.

    That demand has surged in recent months as interest rates and bond yields drop to historic lows, fuelling a hunt for yield.

    “Investors are looking for opportunities to get yield and they are turning to property for that,” said co-founder Shane Quinn.

    The Quintessential Equity Master Fund No. 2 will be an unlisted property fund comprised of a number of single trusts each owning a property but coming under the one umbrella.

    The new vehicle is targeting  an net internal rate of return of not less than 8 per cent annually, although that is based on conservative assumptions.

    The Melbourne-based boutique fund manager hopes to launch the new vehicle as its predecessor moves close to being invested out.

    The first fund – launched as a blind fund taking equity commitments without specific acquisitions, in an initiative rarely seen since the global financial crisis –  opened in April last year and raised more than $112 million.By June this year the first fund had called $105 million of committed capital, acquiring office towers in Adelaide and Perth.

    The first fund is also conducting due diligence on an industrial asset and once that property is acquired the launch of the second Master fund is expected.

    The second vehicle could eventually pull together a portfolio of around $200 million, using a conservative gearing.

    Mr Quinn expects more assets to come on to the market as  institutional investors adjust to a “flattening” in cap rates, with properties delivering less capital growth.

    That in turn could prompt a round of redemptions as institutional investors recover their investment to pursue stronger yielding assets.

    “I think there is a chance we’re going to see assets divested while redemptions are made in this transition from institutional type players,” Mr Quinn said.

    Quintessential has delivered an average net IRR of 23.4 per cent across its portfolio over the past nine years.

    “We have very conservative assumptions when we go out [with new funds]. We have very conservative assumptions when we buy. If it doesn’t meet our criteria we won’t buy,” said co-founder Harry Rosenberg.

    It is not only the falling cash rate which is pushing more investment into property-related assets, but  the perceived risk in broader equities, according to Mr Rosenberg.

    “There is a bit of uncertainty because of what is happening worldwide, not just Australia. Then in the papers we read about Australia not going so well. Money is looking for somewhere to go.”

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