You've recently announced your intention to expand into listed property- what was the thinking there?
We've been looking for some time at whether we'd create a listed property vehicle. Not necessarily to buy assets from our existing vehicles; I think we're very much looking to buy discrete assets.
A number of factors had to be in place for that to occur. One would be the continuing opportunities in the marketplace and there seem to be some continuing value opportunities. Another would be the continuance of reasonably priced debt. Another would be the state of the AREIT market where values have aligned with NTAs rather than being at a huge discount.
Another would be what we see as a pent up demand in the sector for some new product that's different from what's currently out there. I think there's a genuine demand for something new.
The last would be finding someone we could fit in with well, that would help make it possible. There's a lot of stars that have to line up - we've been looking at it for the 15 years we've been in business and we think this is the year. So we're delighted Nick [Collishaw] has come along to join us. He'll be the CEO of listed funds.
What was the thinking behind the Asian venture?
As a fund manager, our principal job is to identify assets we can add value to. When we see assets outside our buy range then we have to look at partnerships or mandates. We haven't done much with the local institutions. I think that's been a function maybe of the asset allocators, but it just hasn't happened. We had to take a view of where we would concentrate our resources and Asia seemed to be logical.
How do you view Australia as an investment destination?
You can only determine that by soundings. We've probably got 40 or 50 live contacts between Malaysia, Singapore and Hong Kong and we know that it definitely is [a desirable investment destination].
Our soundings really reinforce that Australia's been pretty stable - that's not a joke, even with the government we've had. They see our office market as being reasonably well developed and our land title system as being reasonably transparent. I think we've got - both in our listed and unlisted property investment vehicles - a high degree of transparency and certainty.
Impediments that remain: getting the relationships with the right parties such that they form trust with the local manager going forward - that's something that takes effort and time. From our case we don't want hundreds of relationships; we'd rather have fewer deeper ones where we can see ourselves exchanging staff if we get the right relationship. It's possible in the fullness of time we could recycle our capital back up there. That's the sort of relationship we want.
Another impediment is the currency. The currency has been so high for so long, and is predicted to be high for an indefinite period. No-one sees the dollar falling. There is no combination of scenarios or any modelling I've seen from any of the merchant banks that has our dollar falling. That is still a major impediment.
What kind of local investors are you looking to attract - more individual high net worths than institutions?
We've probably got one of the higher concentrations of high net worth property investors on the east coast, with 6,000 investors [in total]. [For] about 1,500 of those there's no intermediary, no adviser. We attract advisers with high net worth clients - it's pretty hard to get into our products without a minimum $100,000 investment and many of our investors invest more than half a million dollars at a time.
[It means] if a vehicle encountered a headwind or there was an opportunity to build a new building, it's easy for us to get those people in a room and ask what they want to do. In 15 years we've rarely had a problem getting a unanimous vote for what we want to do.
In the fullness of time, when we've got a few billion under our belt, the institutions may come knocking and when they do our door's open.
Is it similar in Asia, with demand coming from the more engaged high net worth individuals?
No, it's mostly institutional money: pension funds, all sorts of things, a Scandinavian bank with local representatives in Singapore. It's early days but it's exciting.
Are there any regulatory changes affecting the business?
On the direct property side, the [managed investment trust] tax incentives - until recently there was a 7.5 per cent tax for foreign investors provided there was a local manager. That was sensible legislation, that's good for the county, the property funds management business. Even doubling the tax to 15 per cent, whilst it was done it would appear capriciously and wasn't grandfathered and there was no consultation process. Even at 15 per cent it's a good idea.
You appreciate some of these large acquisitions in the $200, $300, $400 million dollar range, dropping the tax rate from 30 per cent to 15 per cent, it's still a sensible concession.
