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Kate Kachor is a journalist with InvestorDaily, a Morningstar publication.

A lack of financial capital to help progress the Austock Property Funds Management business has emerged as one of the key reasons the company sought a buyer for the division.

In a letter to company shareholders, the board of Austock Group (ACK) admitted that while the business had "considerable potential," Austock "did not have the capacity to help it achieve that potential".

"In the case of the Austock Property Funds Management business, while it is very well-managed, it faced challenges in growing its platform, either by acquisition or initiation, due to the lack of available capital," the letter, dated 8 August, said.

"The funds managed by the Austock Property Funds Management business had delivered only gradual organic growth in FUM (funds under management) from uplifts in valuations of existing assets.

"Many in the market saw Austock and the funds as vulnerable to acquisition by opportunistic parties. The loss of key Austock Property staff would seriously affect the value of the Austock Property Funds Management business."

The letter also revealed the strong performance of the company's life division, Austock Life, saved it from a similar fate to the property business.

"Directors felt that Austock Life offered the better alternative for the generation of shareholder value and the use of capital," it said.

"In the case of Austock Life, the business had grown solidly in the difficult post-GFC (global financial crisis) market and had increased its FUM over the last two years from $175 million to $300 million.

"It has achieved this result requiring only a nominal capital contribution from Austock. Whilst the focus for Austock Life has been the build-up of FUM and the creation of capital value, the business became profitable in fiscal 2012."

Last month, Austock Group advised the market it had reached an agreement for the sale of Austock Property to listed real estate company Folkestone (FLK) for $11 million.

Austock Property Funds Management has about $555 million in growth assets and manages four funds: the Australian Education Trust, Australian Social Infrastructure Fund, Austock Childcare Fund and the wholesale unlisted CIB Fund.

Austock shareholders will vote on the Folkestone property deal at the company's general meeting next month.