How a wider lens during Covid paid off for this direct property manager

As a sector susceptible to the highs and lows of economic cycles, commercial property is often prone to a flavour-of-the-month mentality among investors.

For the GDA Diversified Property Trust, winner of the Direct Property Funds category at the Financial Newswire/SQM Research Fund Manager of the Year Awards 2024, part of its secret sauce has been a willingness to look for opportunities where others aren’t. 

The Hobart fund manager has been quietly buying and managing a portfolio of diverse commercial property assets for many years. 

GDA Group CEO and fund manager John Di Monda said their approach was to look for value in the market “and pivot if we need to”, made possible by the fund not being restricted to a particular geography or sector.  

He cited the period of the Covid-related lockdowns as an example of this approach paying off.    

“Industrial assets were the flavour of the month,” he said.  

“Everyone wanted a warehouse logistics centre…and we saw a compression or a tightening in those yields.”

The category was underpinned by strong tenancy demand which contributed to material rent increases, and while the fund was a beneficiary of that (at the time 60% of the portfolio was in industrial assets), the team also recognised an opportunity to diversify.  

They cast a wide lens and purchased a retail strip mall in Noosa – a contrarian approach when shopfronts were largely closed.  

“It came with a softer yield but was underpinned by some very quality long-standing tenants and allowed us to take advantage of increases in rental income through market and inflation-linked rent reviews that were going through the cycle,” Di Monda said.  

As well as increasing diversification through exposure to non-discretionary retail, the addition of the property benefited the fund by strengthening its income base.  

The mall’s rental income has increased by approximately 6.75% per annum since the fund acquired it.  

Overall, the GDA Diversified Property Trust has outperformed its benchmark, the Lonsec-Select Australian Direct Property Funds Index, over the long-term, delivering 10.26% per annum net over five years versus 3.19% (as at July 31, 2024).   

It aims to provide investors with income and the potential for capital growth.  

The fund consists of nine commercial properties spanning industrial, office, tourism and leisure.  

The properties are located across Queensland, South Australia, Tasmania and Victoria.   

Most of them have been held for many years, reflective of GDA’s strong buy and hold philosophy.  

Di Monda recalls only three occasions in the 13 years that he has been with GDA that they have sold an asset.  

Instead, they work with the tenants to optimise its uses and value.  

GDA is the property manager for the majority of the assets, which Di Monda said allowed them to hear first-hand from tenants about how the properties were performing and where the opportunities were.  

“So then we can work with our tenants through their journeys to ensure the facility satisfies their requirements,” he said.  

The fund is open to wholesale and retail investors, with a minimum initial investment of $20,000.