With the wall of cash dividends hitting investors’ accounts over the coming months due to surging iron-ore prices, there is one question top of mind: What to do with the cash?
Industry analysts are predicting the dividend windfall from BHP Limited (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG) could top $65 billion over the year, in addition to the $7 billion from the Big 4 banks. With the current cycle of almost zero cash rates, the race is on to find sustainable income-producing investments.
Amid the noise of an exciting investment market, there are solid, high-yielding investment opportunities in the periphery of the action that offer both security and good returns.
How to find property assets that stack up
Australians love affair with property has become even more pronounced since the initial shock of the COVID-19 pandemic panic set in. We are both staying and investing locally. House prices from the east coast to the west coast have sky-rocketed and commercial and industrial assets are in hot demand with a raft of banks and non-bank lenders ready to lend money.
The level of appetite and competition in this space is highlighted in Stamford Capital’s latest Debt Capital Markets Survey, which tracks lender sentiment and the latest trends in the real estate debt market.
Based on responses from over 100 lenders, including banks, non-banks and private financiers, the survey found a “dramatic swing from the bleak outlook a year ago” when capital dried up, leverage levels decreased and lending criteria tightened.
Carried out in March this year, the survey found lending appetites were back at pre-COVID levels with increasing deal competition from a growing pool of non-bank lenders expected to compete more heavily on price and force down interest margins.
Private capital chasing higher yields in the booming property market has seen a large increase in the number of new non-bank lenders offering construction and investment loans this year.
While the pool of debt is available, and still relatively cheap, the trick is trying to find the property assets that stack up. This is where an experienced property fund manager can sort the wheat from the chaff. Sourcing the asset is one thing, knowing if you are paying too much is another. Selectivity is the key.
Mining the macro and geographical factors
Looking at macro factors and geographical location is also vital. Where are the industrious activities happening? City or regional, coastal/ports or mining? The mining industry for example has seen a significant uptick since June 2020. Mining exploration in Western Australia is almost at record levels and the capital raising pipeline is strong.
The Australian Securities Exchange notched up 42 IPOs in mining-related businesses over the past 12 months to April 2021 and despite the Covid-19 pandemic, is well ahead of other hotspots including Toronto, with 28, and London with two, according to data compiled by Bloomberg.
With the recent news of a $500 million investment in the Kalgoorlie-Goldfields region by Lynas Rare Earths, along with a $400 million commitment from Evolution Mining (ASX: EVN) for the acquisition of a collection of Northern Star (ASX: NST) mines on the western side of Kalgoorlie, and BHP recently revealing it has struck a deal to supply nickel from the region to Tesla, the region is experiencing a level of sustainable economic activity not seen for many years.
So, it appears on a macro level, locations near to, and supporting the burgeoning mining exploration and production sector seem sensible. Resources need resources, including human capital. But accessing large commercial and industrial assets in those regions is not an option for many individual investors.
A golden commercial opportunity
It takes a skilled property fund manager to find the asset and assess it on its merits.
In the case of commercial property, is it tenanted, to whom, and for how long (WALE)? What are the costs associated with acquiring and managing the property? What is a fair acquisition price and how will it be funded? If everything stacks up, then a due diligence process will follow. Lenders are appointed and capital is raised (normally to the tune of 50% debt funding by banks/lenders and 50% by investors).
For both groups, returns need to be negotiated. And in the case of capital provided by investors, a yield or distribution based on the rental income received will be passed on monthly or quarterly, for the life of the investment, which usually stretches to between five and seven years.
Perth-based M/Group has recently gone through that process on a macro and financing level and plans to invest in a large format, fully leased 6000 square-metre commercial asset in Kalgoorlie, Western Australia forming the Boulder Road Property Trust.
In the heart of the Goldfields, Kalgoorlie is home to 30,000 people, swelling to 40,000 in boom times. With three national tenants locked in for a WALE (Weighted Average Lease Expiry) of 8.08 years, the fund is targeting monthly distributions to wholesale investors of 8% pa for a period of seven years (unless the asset is sold prior and capital returned). That’s 7.5% higher than the current cash rate. Importantly, the tenants are high quality and essential to the locals and the resource sector – RSEA, Autobarn and Heatleys.
Heirloom Takes Home Another WinRead more
Boutique apartment company, Match, was honoured to take home its third Heritage Award for its work in transforming Fremantle’s iconic Dalgety Wool Stores into unique residential industrial warehouse apartments.
WA Apartment Advocacy hosted the 2021 WINconnect Apartment Awards for Excellence over the weekend celebrating those who have played an instrumental role in introducing Perth to the idea of design and amenity-led urban living through apartment development.
Heirloom by Match is one of the largest heritage renewals in the State, and award judges acknowledged “…Match demonstrated fearlessness and innovation in transforming this heritage building into an exemplar of what the City of Fremantle can expect from future developments of a similar ilk.”
The site had sat largely unused for 20 years prior to completion in 2016 and now with all apartments occupied the judges said the project is “…a charming apartment community that pays tribute to its heritage roots.”
Managing Director of parent company M/Group, Mr Lloyd Clark said the awards are a great honour to be recognised and acknowledged by the industry and peers.
“Drawing on our experience with heritage renewals, we knew from the outset that this project would present challenges, however we also saw it as an extremely important opportunity.
“Match is in the business of developing signature properties. It is our firm belief that people want more from their homes, and today Heirloom residents are creating their own space amidst 100 year old Jarrah beams and original heritage features,” he said.
Heirloom by Match was designed by Dominic Snellgrove of Cameron Chisholm Nicol and constructed by national top tier construction company, Built. The development team worked in collaboration with the City of Fremantle, State Government and heritage authorities to achieve a positive outcome.
“Heirloom is unquestionably one of Match’s most significant development projects in the company’s 20 year history. Its location close to Fremantle’s café strip and between the river and the beach is ideal, and it has helped to activate the City of Fremantle and its growth” Mr Clark continued.
“The renewal process was sensitive in nature and proved extremely complex. However, the recognition and accolades we have received are both humbling and extremely rewarding.”
Match had previously been awarded the Heritage Council’s ‘Conservation or Adaptive Reuse of a State Registered Place’, and the prestigious Gerry Gauntlett Award; recognising an outstanding achievement of adaptive reuse in Western Australia for the Heirloom Apartments in 2017. Match was also recognised with the Gerry Gauntlett Award prior to this in 2008 for its highly acclaimed Home warehouse apartments located in Perth CBD and is responsible for other heritage-listed projects such as Maymont in Maylands and Clocktower in Inglewood, which effectively injected new life into the area, as well as a range of cutting-edge design-inspired apartment properties throughout Perth.
For more information visit www.heirloombymatch.com.au or contact 0432 660 066
Playground Completed | The Wedge, Wellard NorthRead more
The Wedge at Wellard North is coming to life!
We have construction of new stages, homes being built, people moving in and have just completed the landscaped park and playground all with the stunning and protected bushland backdrop as you can see in this video.
Bunnings Warehouse Albany | Construction Completed December 2020Read more
Water Tank Art Puts an Indigenous Stamp on Albany’s New Bunnings SiteRead more
A new local landmark and tourist attraction, reminiscent of the popular ‘silo art movement’, has been installed at Albany’s new Bunnings site at Chester Pass Mall.
Commissioned by developer M/Group, the 64-panel Indigenous artwork covering two massive water tanks is inspired by the region’s diverse sea life and its deep connection to the original owners of the land.
The works were created by five traditional local Indigenous artists, Lyn Knapp, Michael Cummings, Tameka Cummings, Kathleen Toomath and Margaret Miller.
Commissioning artwork agent and Wardandi Bibbulmun Elder, Dale Tilbrook, said she started with a concept, but the piece took on a life of its own.
“Our original concept for the installation was for it to resemble a book of stamps, so that each section would be placed between the structure’s rivets. I did a lot of research on the wealth of sea life in the local waters, and when the artists took inspiration from this, the piece materialised into something quite extraordinary,” she said.
“This has been an important project for this group of Aboriginal artists at a time when the steady flow of interstate and international tourisms has been absent from the local galleries. Each artist shared in the commission and have now left their stamp on what will soon become a high traffic area of Albany.”
The public artwork commission represents the value of 1% of the entire development and held a mandate to reflect or enhance the local cultural identity.
Co-ordinated by Minang Elder, Vernice Gillies, and printed by Indigenous owned and operated print company, Sista Girl, the artwork compilation incorporates sea animals from humpback whales to tiny blue ringed octopus and seahorses, displayed on vinyl panels sized between 2200 x 1100mm.
M/Group Managing Director, Mr Lloyd Clark, said the Indigenous artwork does not only pay homage to Albany’s extraordinary natural asset, it also stands as a tribute to the significant contribution that Indigenous communities have had in the development of the new Bunnings property.
“The new Bunnings is the first of its kind to be constructed by Indigenous building services company, Marawar, and supported, where possible, by a fully owned and operated Indigenous supply chain. It is part of M/Group’s commitment to the Reconciliation Action Plan to support Indigenous programs and initiatives,” he said.
“The Bunnings development has allowed us to create a platform for Aboriginal people demonstrate their sheer capacity in delivering outstanding work.
“The new artwork installation will serve as an enduring reminder of their involvement and a visual backdrop to those visiting the new Bunnings building.”
Accompanying the work will be a commemorative plaque:
The oceans surrounding Albany hold myriad treasures. A selection of these wondrous sea creatures has been painted by five Minang artists. Their work has been transformed into the pictures on the water tanks.
Bunnings Regional Operations Manager Hayley Coulson said she was excited to have the artwork ready for the new store’s opening.
“We’re really proud to have such incredible artwork from the local Minang artists as part of the new Bunnings Warehouse in Albany,” she said.
“The new store is on track to open by the end of 2020 and we can’t wait to welcome customers through the doors.”
Bigger Not Always BetterRead more
Developers of smaller apartments projects across Perth say some of the state government’s recent measures to stimulate economic activity and employment in light of COVID-19 are good in theory, but may not meet expectations in practice.
Among the measures is a streamlined assessment process for ‘significant developments’, defined as those projects with an estimated cost of at least $30 million or new residential buildings proposing more than 100 dwellings.
Developer and architect Barry Baltinas hopes the approvals process for the smaller, high-end apartment projects he focuses on could also be streamlined.
“These smaller projects can get off the ground very quickly, helping to create jobs and incomes for Perth families at a time when that is very much needed,” Mr Baltinas told Business News.
“Now more than ever, buyers are putting their health and the health of their family in focus, and boutique living aligns with that.”
Baltinas’s latest project, the $19 million Habitat Residences in Applecross, recently completed construction and features 14 apartments and three penthouses.
Mr Baltinas said the lack of shared facilities at the projects had proved to be a drawcard, particularly in recent weeks.
“It not only means fewer maintenance costs, but brings fewer health implications, which is obviously top of mind for many buyers right now,” he said.
“We’re seeing more activity in the market, in particular from those downsizers who have not been greatly impacted financially by recent events.”
M/Group managing director Lloyd Clark said there had been a lot of speculation about the potential negative impact of COVID-19 on the property industry, but the company’s apartment arm Match, which mostly develops 30-40 dwellings over three to five storeys, had not adjusted its pipeline.
“Boutique product holds its value,” Mr Clark told Business News.
“It’s important to note that the apartment market is heavily impacted by continued population growth, and an emerging generation that values central urban living over the half-acre block.”
Mr Clark said this would continue to increase demand for quality product in desirable locations.
“If the government’s mandate is to stimulate the economy and fast track project development, it needs to approach all areas of the property sector equally,” he said.
“We believe it is absolutely counterproductive for the government to favour one style of dwelling over another in any capacity.
“There is a whole market sector that would never consider high-density living, so disadvantaging them with time delays does not service anyone.”