Countercyclical Commercial Office Investment
We see lots of quality property deals at MP Funds Management and we invest in only a select few that have robust property fundamentals. Often these deals will be countercyclical if: we feel the thematics are strong, the downside protection is sufficient, and the pricing is good. We are always looking for strong downside risk protection with a high probability of outperformance on a risk-adjusted basis.
Whilst a lot of deals we look at do not explicitly meet the MP Funds Management high-teens (plus) total return hurdles, if our executive team feels the transaction is solid with what we feel to be a high probability of outperformance on a risk-adjusted basis, we will often invest personally without underwriting the deal via MP Funds Management.
Via the MP Report Professional and MP Report Premium subscriptions, we provide visibility of how these deals are performing.
One of the deals that I invested some of my SMSF into recently is Marquette Property’s 189 Grey Street, South Brisbane commercial office transaction. Whilst there has been significant downward pressure on values in the commercial office sector, this particular asset has had an improvement in value with December's financial performance ahead of forecast.
Below is an excerpt from a Q&A with Toby Lewis, Founder and Managing Director of Marquette Properties. For the complete Q3 portfolio Q and A on investment risk and value in the investment-grade property sector, Sign in to your MP Report Professional Membership.
Mandi Prager
CEO, MP Funds Management
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Question 6
MP: The June 2023 valuation of your 189 Grey Street was $110m, a $5.5m increase on the acquisition value of last year. Can you talk through this improvement of value?
Toby: We are very happy with the latest result. The drivers were the increased face rents that we have achieved since acquisition, as well as the general reduction in let up time expectations going forward because of the continuing increase in demand for Near City office space.
When we acquired the asset there were 4 vacancies to fill. 2 were quickly filled with 10-year leases to high-quality tenants at incentives of 10% and 75% below budget.
The final two tenancies are in negotiation at incentives of 10% with higher rents than budget.
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This communication is not intended to serve as investment advice or an investment recommendation. The content does not take into account your financial objectives, situation or needs. You should do your own research and, if appropriate, obtain independent advice from a suitably licensed professional before making investment decisions.
* Actual investment performance may differ materially from forecast returns.
** Please note that past performance is not a reliable indicator of future performance.
Disclaimer: Each of Golden Goose Capital Pty Ltd, (AR No:1301 947), MP Funds Management Pty Ltd currently (AR No:1301 946) and MP Report Australia Pty Ltd (AR No:1301 948) has been appointed as an authorised representative of Durant Wyot Funds Management Pty Ltd (ABN 41 655 164 864, AFSL No: 537318).