Assembly set sights on value add and distressed investments

ASSEMBLY Funds Management (AFM), a partnership between Michael Gutman, the Lowy Family Group and Alceon, is looking to raise $350 million for a second diversified fund as it eyes off “value add and special situations opportunities that are beginning to emerge”.

Its first fund, ADPF1 has $350 million of equity commitments from a number of family offices and high-net-worth individuals and is now 75% deployed across a mix of 15 assets in the residential, logistics and alternatives sectors. The remaining equity in ADPF1 is expected to be deployed over the next 12 months into similar assets.

Its new fund, ADPF2, has launched a limited first close and is targeting a final raise of $350 million with a gross return of 15% to 17%.

AFM was launched in 2019 and the founding shareholders have already committed $50 million into ADPF2 and will never be less than 10% of committed capital in ADPF2.

“It is anticipated ADPF2 will have a higher proportion of value add and distressed investments than ADPF1 given the market dislocation and more opportune timing of new investments,” said Michael Gutman, CEO.

“In response to the highly unpredictable financial environment since launching ADPF1 in 2019 AFM has developed a fairly unique investment approach which targets a mix of credit and equity investments across sectors to derive its target return.”

“This strategy has enabled us to continue to deploy into interesting opportunities while balancing risk during a period of great uncertainty.”

ADPF1’s current portfolio is predominantly located evenly between the key cities of Sydney and Melbourne, and weighted 45% to residential and 33% to logistics. Both of these sectors are still experiencing very tight vacancy markets nationally and resultant strong rental growth helping to offset potential capitalisation rate expansion in the short to -medium-term.

The fund holds no office or shopping centre investments, which have been impacted harder by the pandemic and its fallout.

Gutman said the fund’s approach has led to ADPF1’s property valuations increasing 14% as at June, rather than the declines being seen in the broader market.

“History has shown that funds launched during a more challenged financial environment have generally performed well in the years that follow.”