1 00:00:04,050 --> 00:00:06,600 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. There's 2 00:00:07,290 --> 00:00:09,930 Sean Aylmer: so much talk about the property market, about whether house 3 00:00:09,930 --> 00:00:12,869 Sean Aylmer: prices have bottomed, how far they've got to go, the 4 00:00:12,869 --> 00:00:16,770 Sean Aylmer: impact of further rate rises, we sometimes forget about some 5 00:00:16,770 --> 00:00:21,000 Sean Aylmer: of the alternate property assets, commercial property, and I wanted 6 00:00:21,000 --> 00:00:23,100 Sean Aylmer: to look at that today. Things like investing in pubs, 7 00:00:23,100 --> 00:00:25,980 Sean Aylmer: aged care, social housing, and the like. Remember, this is 8 00:00:25,980 --> 00:00:28,920 Sean Aylmer: general information only and you should seek professional advice before 9 00:00:28,920 --> 00:00:32,850 Sean Aylmer: making any investment decisions. Rupert Blunden is a real estate 10 00:00:32,850 --> 00:00:37,020 Sean Aylmer: and equity market specialist and investment director at Jameson TTB, 11 00:00:37,200 --> 00:00:41,370 Sean Aylmer: an alternative asset management firm. Rupert, welcome to Fear and Greed. 12 00:00:41,729 --> 00:00:42,540 Rupert Blunden: Thanks for having me, Sean. 13 00:00:43,050 --> 00:00:46,140 Sean Aylmer: So where are you looking in the property market at 14 00:00:46,140 --> 00:00:46,739 Sean Aylmer: the moment? 15 00:00:47,490 --> 00:00:50,220 Rupert Blunden: Yeah, perfect. I mean, I think probably best to describe 16 00:00:50,310 --> 00:00:54,480 Rupert Blunden: Jameson TTB and what we do and how we're positioned. We're 17 00:00:54,480 --> 00:00:57,870 Rupert Blunden: a real estate private equity firm, solely focused on real 18 00:00:57,870 --> 00:01:02,700 Rupert Blunden: estate in Australia and we focus primarily on assets that 19 00:01:02,700 --> 00:01:07,800 Rupert Blunden: are in transition, so be that pure development refurbishment or 20 00:01:07,800 --> 00:01:12,330 Rupert Blunden: a reposition. So really I guess to dial that down 21 00:01:12,330 --> 00:01:17,730 Rupert Blunden: is everything outside of core investments. So core income investments, they're 22 00:01:18,450 --> 00:01:22,259 Rupert Blunden: the sectors that we're heavily focused on are commercial real 23 00:01:22,260 --> 00:01:27,510 Rupert Blunden: estate. Offices, one of them, but that extends to industrial, self- 24 00:01:27,510 --> 00:01:34,620 Rupert Blunden: storage, aged care, social housing, NDIS, certain residential apartment or townhouse 25 00:01:34,620 --> 00:01:39,240 Rupert Blunden: developments, childcare, a range of different real estate sectors. 26 00:01:39,540 --> 00:01:42,510 Sean Aylmer: Okay. So if we look at some of those, how do you 27 00:01:42,510 --> 00:01:46,230 Sean Aylmer: judge, firstly, how do you judge office versus industrial? I 28 00:01:46,230 --> 00:01:49,200 Sean Aylmer: kind of get that, but aged care or social housing 29 00:01:49,200 --> 00:01:52,380 Sean Aylmer: or childcare, you're going to say it all just comes 30 00:01:52,380 --> 00:01:54,930 Sean Aylmer: back to the numbers, the yield you're getting on it, 31 00:01:54,960 --> 00:01:56,940 Sean Aylmer: but as an investor, how should I think about all 32 00:01:56,940 --> 00:01:59,490 Sean Aylmer: these different classes of property? 33 00:02:00,180 --> 00:02:02,520 Rupert Blunden: Yeah, I think like any investment, I suppose it comes 34 00:02:02,520 --> 00:02:06,630 Rupert Blunden: back to the numbers and you can get caught in 35 00:02:06,630 --> 00:02:08,970 Rupert Blunden: the trap with real estate at really just looking at 36 00:02:08,970 --> 00:02:12,960 Rupert Blunden: the yield. But for us as sort of identifying value 37 00:02:12,960 --> 00:02:16,500 Rupert Blunden: in real estate markets, what we look at are the end users 38 00:02:16,860 --> 00:02:21,660 Rupert Blunden: of the properties that we're investing in and then assess 39 00:02:21,660 --> 00:02:25,139 Rupert Blunden: the suitability of the property, the development, that we're investing in 40 00:02:25,139 --> 00:02:29,220 Rupert Blunden: to that end user. So in the case of a 41 00:02:29,220 --> 00:02:32,400 Rupert Blunden: childcare or self- storage or an aged care, the things 42 00:02:32,400 --> 00:02:35,700 Rupert Blunden: that you might consider are the location, the price point 43 00:02:35,700 --> 00:02:39,180 Rupert Blunden: that the end product is being offered at, the broader 44 00:02:39,180 --> 00:02:43,709 Rupert Blunden: need for development in that sector. So if we take 45 00:02:43,980 --> 00:02:47,730 Rupert Blunden: aged care or we take even apartments that are aiming 46 00:02:48,030 --> 00:02:55,620 Rupert Blunden: for the over 55, over 65 bracket, then really the overarching theme that 47 00:02:55,620 --> 00:02:59,760 Rupert Blunden: supports that investment narrative is an aging population, an aging 48 00:03:00,060 --> 00:03:05,040 Rupert Blunden: baby boomer population, moving from their house in the case 49 00:03:05,040 --> 00:03:08,489 Rupert Blunden: of trying to downsize to an apartment, or moving from 50 00:03:09,300 --> 00:03:13,380 Rupert Blunden: an apartment, a house, their accommodation, to retirement then into 51 00:03:13,410 --> 00:03:18,150 Rupert Blunden: higher care aged care. So it's more of the qualitative 52 00:03:18,210 --> 00:03:22,350 Rupert Blunden: factors that will define whether we'll invest or not. I 53 00:03:22,350 --> 00:03:25,680 Rupert Blunden: guess that's the first stage of what we look at. 54 00:03:26,520 --> 00:03:29,760 Rupert Blunden: The second is going to be how you can invest or 55 00:03:29,760 --> 00:03:32,340 Rupert Blunden: acquire that asset. We don't acquire assets in our own 56 00:03:32,340 --> 00:03:37,080 Rupert Blunden: right. 99% of the time we invest into capital stacks primarily 57 00:03:37,380 --> 00:03:39,780 Rupert Blunden: in some form of structured credit. So we've got to 58 00:03:39,780 --> 00:03:42,780 Rupert Blunden: make very sure that we're actually buying in at the 59 00:03:42,780 --> 00:03:45,960 Rupert Blunden: right price and the asset is worth what it needs 60 00:03:45,960 --> 00:03:49,380 Rupert Blunden: to be to show a profitable development. 61 00:03:50,310 --> 00:03:53,280 Sean Aylmer: Okay. How much harder is that when bond yields are 62 00:03:53,280 --> 00:03:57,690 Sean Aylmer: higher as a result of rising interest rates? The comparisons 63 00:03:58,110 --> 00:04:01,530 Sean Aylmer: to what you are buying into become harder, but is 64 00:04:01,530 --> 00:04:04,830 Sean Aylmer: this more of a long- term investment so it's perhaps 65 00:04:04,830 --> 00:04:06,540 Sean Aylmer: not as important as I'm making it out to be? 66 00:04:07,230 --> 00:04:10,260 Rupert Blunden: It becomes harder because when bond yields are low and 67 00:04:10,260 --> 00:04:14,010 Rupert Blunden: yields are low, because capital's flooding into whatever asset class, 68 00:04:14,220 --> 00:04:16,920 Rupert Blunden: you can get swept up and just invest on the 69 00:04:16,920 --> 00:04:20,760 Rupert Blunden: basis that the yields are always going to decrease and 70 00:04:20,760 --> 00:04:24,870 Rupert Blunden: improve. So it becomes harder to transact on assets because 71 00:04:24,870 --> 00:04:28,650 Rupert Blunden: as you see real estate's longer dated and if you're 72 00:04:28,650 --> 00:04:30,720 Rupert Blunden: going to buy into a structure where the price might 73 00:04:30,720 --> 00:04:33,450 Rupert Blunden: already be set, what you're looking at on the where 74 00:04:33,450 --> 00:04:36,420 Rupert Blunden: forecast yields are going to go, you might find a lot 75 00:04:36,420 --> 00:04:40,590 Rupert Blunden: of the investments that you look at are mispriced and overvalued. 76 00:04:41,339 --> 00:04:43,289 Sean Aylmer: Stay with me, Rupert, we'll be back in a minute. 77 00:04:43,290 --> 00:04:53,820 Sean Aylmer: My guest this morning is Rupert Blunden, Investment Director at Jameson TTB. 78 00:04:54,750 --> 00:04:59,430 Sean Aylmer: So if we go to some of those sectors, you talked about aged care there, you've 79 00:04:59,460 --> 00:05:02,520 Sean Aylmer: mentioned self storage a couple of times without kind of 80 00:05:02,520 --> 00:05:05,820 Sean Aylmer: divulging whether you're involved or not, like whether you're you're invested 81 00:05:05,820 --> 00:05:08,340 Sean Aylmer: or not. What is it about self- storage, which is good? 82 00:05:09,180 --> 00:05:12,630 Rupert Blunden: Self storage. A few things with self- storage. The demand 83 00:05:12,630 --> 00:05:16,620 Rupert Blunden: for the end user is growing as people downsize, move houses, 84 00:05:16,620 --> 00:05:21,540 Rupert Blunden: change locations obviously that occurred to quite some extent from the 85 00:05:21,930 --> 00:05:26,610 Rupert Blunden: city to regional migration and back again. It's an underdeveloped 86 00:05:26,610 --> 00:05:29,430 Rupert Blunden: asset class in terms of the need and the income 87 00:05:29,430 --> 00:05:34,050 Rupert Blunden: profile is relatively sticky. The other benefit is in terms 88 00:05:34,050 --> 00:05:37,710 Rupert Blunden: of the structures themselves, the construction cost is somewhat lower. 89 00:05:37,710 --> 00:05:41,880 Rupert Blunden: It doesn't include a basement and the construction program after 90 00:05:41,880 --> 00:05:45,570 Rupert Blunden: planning approvals and everything else, is also of a shorter 91 00:05:45,570 --> 00:05:49,710 Rupert Blunden: duration than by comparison an office building. It also provides 92 00:05:49,710 --> 00:05:54,480 Rupert Blunden: you some protection to changing market conditions. If the average 93 00:05:54,510 --> 00:05:59,220 Rupert Blunden: lifespan of a building in the CBD is five years 94 00:05:59,220 --> 00:06:01,710 Rupert Blunden: from buying the site to getting the planning to building it, 95 00:06:01,950 --> 00:06:05,370 Rupert Blunden: well a whole range of things can happen in that time. 96 00:06:05,760 --> 00:06:07,440 Rupert Blunden: I mean, in the last five years, if you look 97 00:06:07,440 --> 00:06:12,539 Rupert Blunden: at the office market, you've had COVID, people moving away. 98 00:06:12,540 --> 00:06:15,719 Rupert Blunden: You've had the work from home flexibility, supply chain issues. 99 00:06:15,720 --> 00:06:18,420 Rupert Blunden: What else in that timeframe? If you can shorten the 100 00:06:18,450 --> 00:06:21,570 Rupert Blunden: duration of your investment timeframe, that allows you to have 101 00:06:21,570 --> 00:06:23,670 Rupert Blunden: a keen sense on what the yield might be and 102 00:06:23,670 --> 00:06:27,990 Rupert Blunden: you're less exposed to factors outside of your control. The 103 00:06:27,990 --> 00:06:30,510 Rupert Blunden: other area of self- storage that we like is that 104 00:06:31,350 --> 00:06:33,390 Rupert Blunden: if you're looking at it from a longer term, I mean 105 00:06:33,390 --> 00:06:35,219 Rupert Blunden: we typically like to be in and out of our 106 00:06:35,220 --> 00:06:39,900 Rupert Blunden: investments between 12 to 24 months. Sometimes it's longer depending 107 00:06:39,900 --> 00:06:45,270 Rupert Blunden: on the profile, but an inner city infilled self- storage location, 108 00:06:45,390 --> 00:06:49,349 Rupert Blunden: is basically a shed. And if you're holding that asset 109 00:06:49,350 --> 00:06:53,640 Rupert Blunden: longer term, eventually that can be repurposed into something else. Something you 110 00:06:53,640 --> 00:06:57,120 Rupert Blunden: would assume that the secondary exit in the longer term 111 00:06:57,120 --> 00:07:00,660 Rupert Blunden: for a infill self- storage location, might be a residential 112 00:07:00,660 --> 00:07:04,919 Rupert Blunden: apartment development. So there's sort of multiple exit strategies there, 113 00:07:05,040 --> 00:07:07,650 Rupert Blunden: and the basic build means that if for whatever reason 114 00:07:07,650 --> 00:07:10,170 Rupert Blunden: you got towards the end of construction before the fit 115 00:07:10,170 --> 00:07:12,660 Rupert Blunden: out of the self- storage and you did want to repurpose 116 00:07:12,660 --> 00:07:17,460 Rupert Blunden: it for another use, that just provides security of investment. 117 00:07:18,270 --> 00:07:21,600 Sean Aylmer: Okay. What about social housing? You mentioned that as well. 118 00:07:21,600 --> 00:07:26,280 Sean Aylmer: Is there a good investment thesis for social housing at 119 00:07:26,280 --> 00:07:26,880 Sean Aylmer: this point? 120 00:07:27,420 --> 00:07:32,280 Rupert Blunden: Well, social housing, affordable housing, and even disability housing, there's 121 00:07:32,340 --> 00:07:38,190 Rupert Blunden: yeah, a quantified shortfall in that space. And it's 122 00:07:38,190 --> 00:07:42,510 Rupert Blunden: little understood by investors in the market, not because they 123 00:07:42,510 --> 00:07:45,090 Rupert Blunden: don't have the capacity to, but potentially they don't have the 124 00:07:45,090 --> 00:07:52,110 Rupert Blunden: time because the transaction sizes are smaller. There's very strong 125 00:07:52,140 --> 00:07:54,570 Rupert Blunden: operators in the market who will lease or take over 126 00:07:54,570 --> 00:07:59,010 Rupert Blunden: those assets on an operating agreement. And again, if we 127 00:07:59,010 --> 00:08:02,070 Rupert Blunden: take into account what's gone on the last two weeks 128 00:08:02,070 --> 00:08:06,900 Rupert Blunden: with Silicon Valley Bank, Credit Suisse and a tightening of 129 00:08:06,960 --> 00:08:11,190 Rupert Blunden: credit markets that causes a bit of global unrest at 130 00:08:11,190 --> 00:08:15,150 Rupert Blunden: the macro level, people who need affordable housing or in 131 00:08:15,150 --> 00:08:18,240 Rupert Blunden: the case of disability housing, don't really discriminate to what's 132 00:08:18,240 --> 00:08:21,420 Rupert Blunden: going on in macroeconomic conditions, that they have a genuine 133 00:08:21,420 --> 00:08:25,590 Rupert Blunden: need for that housing. Often there's government support in the 134 00:08:25,590 --> 00:08:30,330 Rupert Blunden: form of rental rebates or rental support. So you do 135 00:08:30,330 --> 00:08:32,760 Rupert Blunden: have a nice floor for your income and you've got 136 00:08:32,820 --> 00:08:37,110 Rupert Blunden: a demand for the end user that I guess is 137 00:08:37,110 --> 00:08:42,990 Rupert Blunden: less impacted by unforeseen economic or geopolitical shocks. 138 00:08:43,470 --> 00:08:49,199 Sean Aylmer: Yeah, okay. The other one just, I mean, recently there's been plenty 139 00:08:49,200 --> 00:08:54,600 Sean Aylmer: of media about spectacularly large prices paid for pubs. Are 140 00:08:54,630 --> 00:08:55,860 Sean Aylmer: pubs a good investment? 141 00:08:56,490 --> 00:09:00,059 Rupert Blunden: Pubs are a great investment. It comes back to how Jameson invests. 142 00:09:00,059 --> 00:09:04,890 Rupert Blunden: We don't invest in core assets, and given the size 143 00:09:04,890 --> 00:09:08,040 Rupert Blunden: of our firm, we don't get the opportunity to invest 144 00:09:08,040 --> 00:09:12,239 Rupert Blunden: in large pub portfolios for the Beach Hotel in Byron Bay. 145 00:09:12,840 --> 00:09:16,349 Rupert Blunden: Our largest investment is in a portfolio of pubs, but 146 00:09:16,350 --> 00:09:20,429 Rupert Blunden: the strategy is with the counterparty that we are working with, 147 00:09:20,760 --> 00:09:24,840 Rupert Blunden: they are going and acquiring owner- operated pubs in and 148 00:09:24,840 --> 00:09:29,790 Rupert Blunden: around Sydney and Melbourne, that are under- utilised, under- renovated 149 00:09:29,820 --> 00:09:35,580 Rupert Blunden: and under- trading. Buying those pubs at a significant discount, 150 00:09:35,580 --> 00:09:41,730 Rupert Blunden: then refurbishing, repositioning, and eventually selling. And the likely strategy there 151 00:09:42,090 --> 00:09:46,230 Rupert Blunden: is combining a number of those styles of acquisition and selling. 152 00:09:46,230 --> 00:09:49,980 Rupert Blunden: So that type of investment for us means that you're 153 00:09:49,980 --> 00:09:53,850 Rupert Blunden: not solely when you buy a core pub, reliant on 154 00:09:53,850 --> 00:09:57,090 Rupert Blunden: yield compression, which I don't think anyone can rely on 155 00:09:57,120 --> 00:10:01,979 Rupert Blunden: in the short to medium term. It's reliant on improving 156 00:10:02,160 --> 00:10:06,959 Rupert Blunden: the income and maximising the space. And so that in 157 00:10:06,960 --> 00:10:11,250 Rupert Blunden: itself allows for both an improvement in the income stream 158 00:10:11,309 --> 00:10:14,010 Rupert Blunden: and potentially an improvement in the capitalisation rate and what 159 00:10:14,010 --> 00:10:17,579 Rupert Blunden: you acquire it for, because a rundown pub is going 160 00:10:17,580 --> 00:10:19,860 Rupert Blunden: to trade at a much higher cap rate than a 161 00:10:19,860 --> 00:10:22,140 Rupert Blunden: core at any given point in the market. 162 00:10:23,100 --> 00:10:24,840 Sean Aylmer: Rupert, thank you for talking to Fear and Greed. 163 00:10:25,110 --> 00:10:25,830 Rupert Blunden: Thank you very much. 164 00:10:26,280 --> 00:10:30,120 Sean Aylmer: That was Rupert Blunden, Investment Director at alternative asset management 165 00:10:30,120 --> 00:10:33,179 Sean Aylmer: firm, Jameson TTB. This is the Fear and Greed Daily 166 00:10:33,179 --> 00:10:35,699 Sean Aylmer: Interview. Remember, this is general information only and you should 167 00:10:35,700 --> 00:10:39,449 Sean Aylmer: seek professional advice before making any investment decisions. Join us 168 00:10:39,450 --> 00:10:41,309 Sean Aylmer: every morning for the full episode of Fear and Greed, 169 00:10:41,309 --> 00:10:45,179 Sean Aylmer: Australia's most popular business podcast. I'm Sean Aylmer. Enjoy your day.