The organisers of the $200 million Colonial First State listed property fund, which was launched yesterday, expressed concerns about the amount of money advisers are channelling into unlisted and syndicated property vehicles.
Colonial First State Investment chief executive Bruce Abraham says he is "very concerned" that the public were investing so heavily in syndicates, many of which had just one building, one tenant and little, if any, liquidity.
Meanwhile, Andy Coupe of organising broker Warburg Dillon Read backed up Abraham's concerns. He suggested advisers were putting people into syndicated property because of the high commissions they were paid to do so.
Coupe says advisers are paid commissions of up to 4% to put clients into syndicated property, compared to 1.5% for the Colonial property fund.
Abraham says more need to be done to educate the public about the benefits of listed property trusts, which offered liquidity, diversified portfolios and transparent fee structures.
The Colonial First State Property fund includes 11 properties owned by Colonial and three acquired from Symphony Group. Colonial picked up many of the buildings in the trust when it acquired Prudential last year.
The key features of the trust are its forecast dividend yield of 10.3 per cent in the 10 months to March 31, the diversification of the buildings and its size.
Abraham says the trust's yield was pitched at a level where it would be competitive to the other diversified property trust, Kiwi Income Property Trust.
The yield is based on "very conservative forecasts," Abraham says, and was achievable because of the prices it will pay Colonial for its buildings.
While the trust is geographically diversified with assets in Auckland (55%), Wellington (31%) and Christchurch (14%), it is skewed to the decentralised Auckland office market.
Nearly three quarters of its assets by value are in the office sector. Retail comprises 12% of the portfolio, office/warehouse 10% and industrial 7%.
The fund will have a target gearing of 30%, and it has a number of financial covenants.
The total offering is 145 million units at $1 each. Colonial will subscribe for 45 million, and of the 100 million in the public pool, 15 million have been earmarked for Colonial shareholders.
The offer opens on May 4 and closes on May 27, with listing on June 3.
The organisers of the $200 million Colonial First State listed property fund, which was launched yesterday, expressed concerns about the amount of money advisers are channelling into unlisted and syndicated property vehicles.