Vodafone building, 213 Tuam Street, Christchurch.

Investing in bricks and mortar has traditionally been a reliable choice, offering consistent returns even in challenging economic conditions. Commercial property, as an asset class, has a proven track record of steady performance. By investing in a well-managed fund, individuals can enjoy genuine passive income throughout the year.

“Over the long term, investing in commercial bricks and mortar has been a source of reliable income for investors,” says Scott McKenzie, CEO of PMG Funds. “If your property portfolio is carefully selected, well managed, and diversified, history shows us that it will grow in value over time.”

With $850 million in assets under management, and in-house property management for all tenants, PMG offers investors access to outstanding commercial property at an affordable price.

At PMG Funds, our four unlisted managed funds provide a vehicle for investors to take advantage of the commercial real estate investment opportunity. Each fund owns and manages a portfolio of properties, spreading risk through diversification across location and sector.

“PMG has been operating for more than 30 years, and during that time we’ve been on a journey of consistent performance and continuous development,” McKenzie says. “Throughout many economic cycles, we’ve been able to evolve a robust funds management model. Our investors really appreciate the income resilience our funds provide, and our focus on the future.”

Quicker recovery

During the global financial crisis (GFC), the value of directly held commercial property fell by around 40 per cent, but recovered within three years; it took the share market six years to regain its pre-GFC value.

Although buying a property as an individual is challenging right now due to bank loan rationing and high interest rates, property funds remain accessible for most investors. Owning shares or units in a property fund allows you to buy into the property market at an affordable level. You’re then positioned to benefit from the recovery without having to worry about high interest rates or parting with a massive deposit.

You can invest a relatively small amount of capital in unlisted direct property funds, which provide diversified exposure to high-quality real estate valued at hundreds of millions of dollars, and all the benefits the sector provides. That’s a world away from the hundreds of thousands you’ll need to find to concentrate into one property, even at lower prices.

Maximising Opportunities

Preparing your balance sheet ahead of economic headwinds is part of a solid conservative strategy for savvy investors. At PMG Funds, proactively lowering bank loan gearing levels is an important part of our strategy across all our funds. That helps us manage our interest costs in an increasing increase rate environment and improves our balance sheet strength – and it does the same for individual investors.

“One of the major upsides of reducing gearing is that our funds are in a stronger position to invest in property at good value, particularly should asset prices adjust downwards. For us that might mean high-quality commercial buildings with reliable tenants being acquired at better value than we could achieve in recent years. For individual investors, this value is typically reflected in overall returns within our funds over time,” says Scott.

Being ready to move when you see opportunities can help set you up for many years to come – as anyone who bought their house, or invested, during the GFC can attest to.

Great Tenants, Quality Buildings

In addition to regular returns, owning units in a managed commercial property fund can give you exposure to asset classes that are traditionally hard to access for individual investors. For instance, our Direct Office Fund is sector-specific to large office buildings, while our Direct Childcare Fund owns only purpose-built early childhood education centres. Our Pacific Property and Generation funds invest across a range of high-quality commercial buildings.

“Some of our investors also enjoy having some ownership in a landmark building like the heritage-listed old Ford Motors property in Lower Hutt, or have first-class tenants like Coca-Cola, Torpedo 7 and Kiwibank,” adds McKenzie. “By working with excellent tenants and owning outstanding buildings, we can give our investors the regular income they are looking for.”

Across all four of PMG’s property funds, cash distributions are paid into an investor’s nominated bank account each month.

“While past returns are not necessarily predictive of future returns, our active management approach means the funds are resilient and backed by sound strategic decision making that helps ensure continued resilience and growth,” says Scott.

The information in this story is of a general nature and was current as June 15 2023. It is not intended to be regulated financial advice for the purpose of the Financial Markets Conduct Act 2013 and does not take your individual circumstances and financial situation into account. PMG does not provide financial advice. Please seek advice from a licenced financial advice provider before making any investment decisions.

Scott McKenzie is CEO and Director of PMG. He has 20+ years of experience across banking, funds management and commercial real estate. Scott is a board member of Priority One, founding board member of the Urban Taskforce for Tauranga, principal founding Trustee for PMG Charitable Trust and founding Director of Forsite health and safety app. www.pmgfunds.co.nz