Outlook - Winter 2009

07 July 2009

Please click here to download a copy of the latest Quarterly report.

Please click here to view a Material Information Guide which indicates where particularly important, material information relating to distributions, debt and assets is located within the report.

The current falls in investment valuations around the world have had an impact on everyone. The savagery of the global financial crisis has now infected all parts of the Australian economy with credit markets effectively shut down, financial institutions unable or unwilling to lend money, and businesses contracting in response to low consumer demand and poor sentiment.

We acknowledge this is of limited comfort to you if you are retired or in the process of retiring and your income and asset values have fallen. The key question is when will you see some improvement?

Our view is that we should see the low point of the property cycle in the next 6-12 months but a sustained improvement will still be 18-24 months away.
In the latest edition of Outlook we take a close look at the Australian property and debt markets and the effect these may have on your investments. Distribution guidance for the financial years ending 30 June 2009 and 2010 has also been included for all Orchard funds.

What is Orchard doing?

The Orchard team continues to be focused on stabilising the funds in an effort to best protect your capital against the impact of falling property values, refinancing risks and potential vacancy risks. This involves renegotiating debt facilities, recapitalising funds, selectively selling assets and actively dealing with leasing renewals and vacancies. These actions are designed with the primary goal of recommencing income distributions in all funds as soon as possible. In some cases, our efforts during the last 12 months have been sufficient; in other instances, there are still some hurdles to overcome. 

To this end, the following Orchard funds will pay  income distributions in July 2009:

  • Childcare Property Fund             
  • Essential HealthCare Trust 
  • Hybrid Property Fund
  • Banksia Street Heidelberg Joint Venture
  • Barossa Valley Resort 
  • Sydney HealthCare Trust 
  • Primary Health Care Darlinghurst Syndicate

Our strategy of dealing with funds not able to pay a distribution in July 2009 is as follows:

  • A proposed $200 million recapitalisation of the Orchard Industrial Property Fund is presently being considered by investors; if approved, this proposal will allow the recommencement of distributions.
  • Terms to raise $50 million in capital for the Commercial Office Fund (COF) have been finalised and the product disclosure statement will be available shortly; this offer is designed to recapitalise COF.  Guidance on resuming distributions cannot be made until after the success of the capital raising has been determined.
  • A rights issue in the Chevron Renaissance Property Trust is being considered.  Guidance on resuming distributions cannot be made until after plans for the capital raising are further progressed.
  • A restructure plan is being finalised for the Primary Infrastructure Fund and a proposal will be presented to investors later this year.  Guidance on resuming distributions cannot be made until after the success of the restructure proposal has been determined.
  • An independent strategic review is underway for the Diversified Property Fund (DPF); the result of this review is expected to identify a long term solution to all stakeholders in DPF.  Guidance on resuming distributions cannot be made until after the strategic review process has been considered and recommendations implemented.

At a corporate level, Orchard has also taken tough measures to reshape its business to better reflect the changing investment management landscape.  As part of the changes to the organisation, greater independence has been introduced to the Orchard boards of directors and the appointment of further independent directors is imminent. 

We will continue to communicate our strategy and management activity through our Outlook publication, website updates and other interim communications.  We recognise that as custodians of your money, timely, transparent and accurate reporting of the performance of your investments and the investment management strategies we are employing, are of critical importance to you.

We recognise that in managing your money, we are managing your quality of life. This is a responsibility we take very seriously and appreciate that confidence and trust are imperative to any successful long term relationship.

We urge you to read the latest Outlook publication and encourage you to direct any outstanding questions you may have to your financial adviser or Orchard Investor Services on 1800 008 494 or at info@orchardfunds.com.

We thank you for your continued support.