MP Report Highlights.

We are starting to see some interesting pricing opportunities and value from a counter-cyclical perspective in the commercial office sector. Join the conversations with Toby Lewis, Founder and Managing Director of Marquette Properties.

Join the conversation with Toby Lewis, Founder & MD of Marquette Properties, as he shares invaluable perspectives on prime asset acquisition and emerging opportunities during our Q3 Portfolio Performance Q&A .

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.

Q3 Portfolio Performance with Toby Lewis, Founder & Managing Director of Marquette Properties. We first had exposure to Toby Lewis and Marquette Property in about 2014 via a property transaction that netted a c. 20% investment return (IRR).

I really love this regional shopping centre deal that we have seen recently. Whilst it does not explicitly meet the MP Funds Management high teens (plus) return mandate, my gut feeling (based on the property fundamentals) is that the deal will significantly outperform the stated 13-15% IRR and 8% annualised distribution in the Information Memorandum*.

Especially when the deal has been conservatively modeled, is underpinned by defensible property investment attributes and fundamentals, and with what I would believe to be a high probability of outperformance to the stated base case on a risk-adjusted basis.

Based on my understanding of the property fundamentals of the deal I believe there is a high probability of outperformance (on a risk-adjusted basis) to this articulated base case.

The commercial office investment sector is being watched with a high degree of focus as movement starts to happen, and after an extreme dry spell, tangible market evidence to benchmark value crystalises.

In a climate where infamous investor Warren Buffett's partner, Charlie Monger, overtly warns of overexposure to the commercial property sector, with his warning extending to a liquidity warning to those banks with senior debt exposure to the sector, just what are the factors driving risk and value?

At MP Funds Management we have investment exposure to the commercial office sector. We believe the commercial office sector can be a valuable store hold of wealth however, with vastly shifting levers such as an increase in interest rates, reduced physical occupancy due to work from home, and a range of other factors, pricing and value in the sector overall are changing; with cap rates expected to blow out and values believed to be trending downward as a general theme across the sector.

With decades of experience, Terry has successfully developed residential properties and managed 1,000+ apartments under a build-to-rent scheme alongside his brother Nick.

In 2023, caution is the key to real estate investment, with opportunities likely to arise in specific property assets where the fundamentals are strong and there is an imbalance in supply and demand. Focusing on tenant-led transactions with pre-committed strong underlying tenants in the commercial office development sector can present lower risk and provide a potentially robust income stream post-completion.

As billionaire investor Sam Zell famously said, "We buy deals, we don't buy markets."

The residential landscape in Australia faces challenges, with only around 10.2 million dwellings available to house over 25.5 million people. Supply-demand imbalance is currently exacerbated by higher financing costs and increased construction prices.