Investment Portfolio

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SPONSORED POST
I have a client getting 100 percent average growth and returns on his investment portfolio year on year. He’s a department head of one of Australia’s top four banks. He’s not alone – I have many clients getting plus 100 percent returns year on year.
The question I often get asked is ‘what are they investing in?’ But that would be the wrong question.
The big question is: what do we want property to do for us? 1,973,000 or around 8 percent of all Australians own an investment property.
Only 18.9 percent have two properties, 5.5 percent own three, 2 percent own four and 0.9 percent have six or more. That tells us less than 2 percent of the population are using property to build wealth.
Around 7 million Australians own real estate.
The three main reasons to buy a property are: to live in, for income or for capital growth.
So what do we want an investment property to do for us? Two things: give us income and/or give us growth.
The general rule of thumb is the higher the income the lower the growth (i.e. commercial property) and similarly the higher the growth the lower the income.
So when we buy an investment property we need to be clear about our primary objective: growth or income.
I’m a growth-focused investor. Income is important but growth is the focus. The only part of a property that grows in value is the land. Rule number one for me is 40 percent land content.
So how do you get 100 percent plus per annum figure? The answer is compound growth
98 percent of investors make the biggest mistake you can make – they’re simple investors. They know two questions to ask: ‘what are my returns and when do I get my money back?’
When it comes to property they have one mantra; ‘location, location, location.’ Generally the best location is close to where they live.
Simple investors buy with a view to then sell. Compound investors focus on growth and use this growth for leverage, enabling them to grow their portfolio on their initial investment. Some very important factors then come into play with the strategy. For example the bank you use is vital – you must get a copy of the bank valuation and resist cross-collateralising your own home.
And to top it all off, Australia’s population growth is 1.5 percent-2 percent p.a. Custodian investors have their land bank strategically placed in growth areas where the average population growth rate is over 6 percent p.a. that’s more than three times the Australian average. ‘
Land is the commodity and land is the focus.
John Fitzgerald is CEO of Custodian Group. He founded his company in 1981 and has since bought, sold and developed more than 10,000 properties in 4 states of Australia. He wrote the 7 steps to Wealth in 1998 - now in its 7th edition. Get a copy at <a href="https://www.custodian.com.au/getthebook/" target="_blank">getthebook.com.au</a>.
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jchancellor-FAypfDUnLy

Invest in land - that is where the growth is: Custodian

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For those of you who follow my writings (I am grateful), you may be aware that I started my property journey 14 years ago.
Lately, I’ve been reflecting on what’s happened over that time. It’s nice to allow time to remember because life can be so hectic.
14 years ago I purchased my first investment property. I had purchased two homes (principal places of residence – PPRs) before then but one of them hardly counts.
I’d bought a house with a boyfriend who decided a few weeks after we settled on the property and moved in together, that he wanted to ‘explore’ a relationship with an old flame.
Well that went down like a ton of bricks!
Here I was working crazy hours in a product manager’s role, studying at university three nights a week and just invested all of my hard earned savings into a home with someone now thinking the grass may be greener elsewhere.
Needless to say I ‘asked’ him (very loose description) to move out, giving my blessing for his so called ‘exploration’ project. I then put the house up for lease and moved home to mum and dad – thank goodness for parents.
After a couple of years, I sold my 50 percent share to him, recouped my savings and promptly used them for a deposit on my second home, bought with a husband this time. I’m still living in this home and it has served us well.
Back to my investments…it all started when I was pregnant with my first son and picked up the book Rich Dad, Poor Dad by Robert Kiyosaki. This was life changing for me and literally a light bulb moment.
I put the book down, booked into an intensive property educational course and whilst studying, working, pregnant and highly motivated, bought my first investment property. It settled around the same time my beautiful son was born and I couldn’t have been happier. I was now a property investor and a mother.
This led to buying four more within two years. Sydney was in a growth phase – it was 2002 - but still property seemed very expensive, pretty much like right now! I quickly learnt that whilst the properties were increasing in value, the yields in Sydney were decreasing. I needed cash flow and the properties I’d purchased were negatively geared. Not bad for my tax returns, but still draining.
I’d already started researching large regional areas outside of Sydney where properties were cheap, rents were strong and land size large. I purchased a property, renovated the house, added two dwellings and subdivided it. Now I was a property developer as well as an investor.
I loved the idea of adding value and creating equity, rather than passively waiting for growth.
This led to my property development project management business; Property Bloom. I had two friends who saw what I was doing and wanted me to manage a development for them. And so I started a system that I’ve never stopped refining. My first two clients/friends lead to many more and now I’ve developed over 100 properties for happy investors who wanted to take their first step into property development but needed some help.
What else has happened?
I had another beautiful son 9 years ago. This was interesting times with a little baby and a 6-year-old to care for and a growing business to run, I worked harder than ever. There was no napping when the baby slept, I’d jump into the office when he napped during the day and work into the nights. I was tired but determined.
My determination came from watching my parents retire on very little. There was no Super in those days. They had some money from selling the family home and downsizing to a sea change location but had to rely on pensions. No grand world trips to celebrate years of hard work for them. They were still happy, but had less options. I wanted a lot more for my retirement. I wanted the freedom and options that comes from having money.
My property portfolio appreciated and my business grew. I felt I was finally building wealth. Then, 3 years ago the worst thing happened.
After almost 20 years, my marriage crumbled and I found myself in the most difficult time of my life. I was scared. I didn’t know how I could get through it or what the future held. I focussed on one day at a time and thank goodness my business kept me focussed.
Guess what? I did get through it, my financial situation actually improved even after the property settlement with my ex and I am happy. I coped because the energy around me changed. I know this sounds a bit new agey but the energy in my life during the final stages of marriage was not good. As soon as things changed, I literally felt positivity radiating around me. I have awesome friends, awesome sons and awesome family that all helped me and I am very grateful.
I have learnt that gratitude is paramount. When you feel grateful, you feel great. Try it. Think of something you are really grateful about and I guarantee it’s put a smile on your face. You can also attract things and people into your life with the right focus and energy. Trust me it works.
When I read that book 14 years ago, I had no investments and were about to start a family. Now I have a portfolio of investments and feel secure about my future. My pride and joy – second to my two sons of course - is Property Bloom, my business. I get to do exactly what I love every day, help others and have flexibility and time for my boys and special friends.
Life is good. 
Jo Chivers is chief executive officer of property development project managers <a href="https://www.propertybloom.com.au/about" target="_blank">Property Bloom</a><a href="https://www.propertybloom.com.au/">.</a>
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jochivers-wq5Bp59R5a

A lot can happen in 14 years: Jo Chivers

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A $250 million plus pure Sydney industrial portfolio is expected to attract significant interest among private, institutional and offshore buyer groups when it hits the market next month.
Colliers International’s Gavin Bishop and Tony Iuliano, in conjunction with Chris O’Brien and Matt Haddon of CBRE, have been appointed to sell a six-asset, 150,000sqm portfolio of prominently located and tenanted industrial properties in and around Sydney.
All the assets within the portfolio also have highly sought after locations close to key road and investment project infrastructure.
All properties fall within recognised institutional investment-grade locations popular with both private and institutional investors.
“The portfolio overall has a strong WALE of 6.75 years, with 43% of the portfolio having a lease expiry beyond 2020, providing strong security of income,” Mr Haddon said. “55% of the net income is evenly balanced between four out of the six assets, and the tenancy profile overall is very strong.”
The portfolio comprises of six assets located in the following suburbs::
<ul>
<li>Huntingwood: A modern warehouse and distribution facility with easy access to the M4 and M7 Motorways. Leased to long term tenant, DHL.</li>
<li>Minchinbury: A  high quality, functional warehouse facility with excellent access to the M4 and M7 Motorways, leased to Star Track Express.</li>
<li>Villawood: A functional warehouse and manufacturing facility  leased to Pact Group</li>
<li>Fairfield: This asset is considered the best logistics facility in Fairfield, leased to Fantastic Furniture and DB Schenker.</li>
<li>Kingsgrove: A modern office-warehouse facility, with easy access to the M5 Motorway and 10 minutes from the Port of Botany. Leased to Shriro Australia.</li>
<li>Blacktown: A highly functional warehouse and manufacturing facility to Snack Brands, close to the M7 Motorway.</li>
</ul>
Mr O’Brien said 51% of tenants are ASX-listed, 25% are multinational companies and 24% are major corporate occupiers.
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j.ballantyne1990-6AQqhLzZaK

Rare Sydney industrial portfolio set to make waves in hotly contested market

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Portfolio deals worth US$13.0 billion underpinned income-producing commercial real estate investment in Asia Pacific, where volumes were little changed in the third quarter of 2016 (Q3 ‘16) compared to a year earlier.
Analysis by Real Capital Analytics (RCA) revealed that these large transactions masked a generalised slowdown across the region caused by investor caution and a mismatch in pricing expectations between buyers and vendors.
Completed sales of properties in the region, excluding development sites, totalled US$30.4 billion in Q3 ‘16, 1.1% weaker than the same period a year earlier, according to RCA data.
The region saw fewer active buyers and deals completed in July through September, with portfolio deals accounting for 43% of total investment volumes.
For the first nine months of the year, investment declined 18% year-on-year (YoY) to US$84.3 billion.
Petra Blazkova, RCA’s Senior Director of Analytics for Asia Pacific, said high asset prices as well as economic, financial and political concerns, that caused a slowdown in activity in the first half of the year, continued to impact investment decisions in the Asia Pacific region.
"China, however, bucked the trend as it outperformed all other markets in the region during Q3 ’16, overtaking Australia as the second most active market by transaction volume.”
Offices were the best performing sector in Q3 ’16. It was the most active sector in eight of the region’s leading cities - Tokyo, Hong Kong, Singapore, Seoul, Sydney, Shanghai, Beijing and Melbourne. The average transaction size was US$80.0 million, or 2 percent more than in Q2 ‘16, underscoring investors’ preference for core, secure income-producing assets.
Prices, however, remained broadly unchanged at record highs, except in Australia, where yields continued to compress.
<a href="/images/2016/11/08/Chart%201.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/11/08/Chart%201.jpg" alt="">
In Mainland China, there were US$10.0 billion in direct real estate transactions recorded in Q3 ‘16, representing 28 percent YoY growth.
While this increase was in part due to the completion of a number of mega portfolio deals during the quarter, underlying appetite for Mainland China real estate remains robust.
In Hong Kong, activity continued to be boosted by Mainland Chinese investors’ purchases, based on confidence fuelled by relatively limited new supply and low vacancy rates.
Total transaction volume in Hong Kong reached US$2.8 billion in Q3 ‘16.
Together with Mainland China, Hong Kong is the only other market in the region currently performing above their long-term volume averages.
In Australia, market sentiment was positive, supported by relatively stable volumes of US$5.1 billion, which while down 13 percent YoY, is still around its long-term average.
Prices continued to trend upwards, with yields compressing across all asset classes and geographies.
Analysis by RCA revealed that the premium to Australian government bond yields remained wide in historical terms, indicating that asset prices could still rise further.
In Singapore, overall volumes grew by 54 percent YoY on large but limited acquisitions primarily within the office sector, notably the sale of a stake in Capital Square by Keppel Land to ARA Asset Management.
In South Korea, where 90 percent of investors are domestic, investment volumes reached US$2.8 billion in Q3 ‘16, more than twice the level from a year ago.
“South Korean investors have been very active both at home and internationally. Interestingly, South Korean institutions were Asia Pacific’s most prolific investors outside the region, making US$4.8 billion in purchases year-to-date. This pattern is likely to continue with US$2.8 billion worth of additional purchases still pending according to our calculations,” Blazkova from RCA added.
In Japan, volumes fell 27 percent YoY to US$6.8 billion on a lack of suitable stock and a reluctance by buyers to pay current prices.
Its record high asset prices, a strong yen and competition from domestic real estate investment trusts (J-REITs) are leading to what could be a structural shift, as international investors turned net sellers there for the first time in six years, RCA data showed.
GE Capital and Fortress were among the notable international institutions to have disposed of assets in Japan during Q3 ’16.
In the region, cross-border transactions continued to increase in importance for the quarter, accounting for one-third or US$11.5 billion of the value of all transactions in the region in Q3 ’16.
However, proportionally this was mainly due to domestic investors pulling back rather than a strong expansion of capital deployment across borders.
For the third year in a row, investments by foreign investors into Asia Pacific declined, standing at less than US$10 billion currently compared to the peak of US$38 billion in 2007. Asian investors have been stepping in to fill the gap.
Historically, Singapore capital has been the most nimble and aggressive in investing across the Asia Pacific region.
It remains an important source of capital, but over the last nine months Chinese and Hong Kong investors have become the most dominant foreign source of capital within the region.
So far this year, Chinese investors have purchased US$3.9 billion worth of assets in Hong Kong and made US$1.5 billion worth of investments in Australian property.
RCA’s Blazkova concluded that uncertainty about economic growth, deflationary pressures and prospects for interest rates, combined with geopolitical risks, are weighing on investor sentiment.
"While the low interest rate environment militates for real estate investment, few investors are prepared to pay asking prices for a dwindling number of assets available in the market as owners adopt a buy-and-hold strategy.
"Nonetheless, the region continues to present good opportunities and we can expect creative approaches especially from foreign investors that wish to invest in the Asia Pacific region.”
The Asia Pacific Capital Trends report also revealed:
• The single largest property sale in Q3 ’16 was the US$658.7 million sale of a stake in Jinqiao Life Hub to Chongbang Development by Keppel Land.
• The largest portfolio transaction was CITIC’s US$4.7 billion (RMB 31.6 billion) residential assets sale to China Overseas L&amp;I.
• Ten cities accounted for 65 percent of overall activity for the first nine months of 2016, as investors continued to focus on city or urban area performance rather than countries.
• New institutional capital is being led by Chinese insurance companies, particularly China Life, Anbang and Ping An, with cumulative domestic and international investments of more than US$10 billion each since early 2012.
• Chinese developers continued to increase their land bank, acquiring US$226.9 billion in development sites over the first nine months of the year. Average development site prices have increased by 54 percent YoY in Q3 ’16, RCA data shows.
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Asia Pacific commercial property investment stabilise in Q3 with portfolio deals masking slowdown on pricing stand-off

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Dexus advises it will cease the management of the Australian Mandate, comprising a $1.6 billion property portfolio from June 30, 2020.
The diversified Australian Mandate comprises properties managed by Dexus on behalf of NSW Treasury Corporation (“TCorp”) for more than 30 years, and TCorp remains a long-term investor on the platform via other vehicles.
The Australian Mandate has achieved outperformance versus benchmark over 1, 3, 5, 7 and 10 years as at December 31, 2019. 
Dexus’s funds management business has achieved significant growth since FY12 and has recently attracted new like-minded partners such as GIC and M&amp;G Real Estate to invest alongside through the cycle.
There are currently several opportunities in the pipeline for Dexus to onboard investors with open investment periods and growth strategies.
The transition of the Australian Mandate is expected to have no impact on either Dexus's Adjusted Funds From Operations or distribution per security in FY20, with market guidance of distribution per security growth maintained at circa 5.5 per cent for the 12 months ended June 30, 2020.
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