Assembly Funds Management kicks off $100m raise for property fund

Potential investors were told Assembly has been scrutinising various sub-sectors within the property market to pin down high-return bets, triggered by market dislocations and structural changes. And it has zeroed in on “living sector” investments – including rental products, retirement and land lease communities – as the patch where higher interest rates have set loose the juiciest countercyclical opportunities.

Gutman is aiming for 15 per cent to 17 per cent in annualised target returns from ADPF2, whose mandate allows it to invest in either debt or equity.

In traditional build-to-sell products, he has focused the firm’s attention on senior or mezzanine loans where there is some first-loss protection from cost overruns and delays. For completed rental stock, the fund is seeking opportunities to acquire assets discounted to the replacement cost.

“The investment strategy for the ADPF series has proven to be attractive to investors due to its ability to invest across sectors either in debt or equity. In particular, it provides the flexibility to weight towards the sectors where we see the greatest operational tailwinds,” Gutman said.

“We would expect to see a rebalancing from debt to more equity transactions as the interest rate reduction cycle progresses, improving the risk return profile for equity over debt,” he said.

Its predecessor, ADPF1, is 80 per cent through deploying the $350 million raised between 2019 and 2022. Its picks included Sunshine Square in Victoria and Longs Lane Terraces in Sydney’s The Rocks which were converted to 17 terraces. The portfolio also holds a smattering of industrials, childcare and townhouse properties.

With another raise under way and Assembly’s inaugural fund still holding on to some dry powder, the team should be busy on the M&A circuit through to mid-2025.

Assembly Funds Management was set up in 2019 with a $75 million cornerstone investment from the founders of Westfield and Scentre Group. It attracts money from local and foreign wealthy family offices as well as institutional investors. Gutman became chief executive of Assembly after Lowy sold his shopping centre empire to European giant Unibail-Rodamco for $32 billion in 2017. Sydney’s Alceon Group is also a shareholder.

Gutman and his team have steered clear of retail and commercial assets, which they reckon face liquidity, leasing and valuation challenges. Assembly’s usual hunting ground is the living, logistics and alternatives sectors.