Jake Elmhirst from Coller Capital speaks to James Dunn from The Inside Network on what private equity secondaries are. The Inside Adviser
As the biggest ETF provider in Australia, Vanguard has the right to crow about another knockout performance over active equity. But invective commentary is a red flag, especially when it’s based on something as changeable as recent market performance.
Rent roll fund hunts down defensive income yield for investors
With interest rates still at historic lows, demand for defensive income-producing assets remains in the wholesale investment space. According to Murray Darling Capital Trilogy Group director and investment committee member Michael Birch, rent rolls can generate stable, consistent yield to meet this demand.
Birch, a well-known player in the capital markets space with 25 years experience across funds management, corporate advisory and broking, is in the process of launching the MDC Trilogy Wholesale Yield Fund I, which seeks to give investors exposure to Australian residential property by owning property management assets such as rent rolls.
Birch is a firm believer in generating rental income through a high-quality rent roll, but setting up a fund that is in a position to succeed is no easy ride. The amount of research and planning work required is substantial, he says, which is why it took three years to get off the ground.
“We might have three months of due diligence before you can pull the trigger on any one asset, and then to make sure we’ve got a clear pathway to grow those assets,” he tells The Inside Adviser.
A rent roll fund is highly idiosyncratic, he explains, with a broad spread of real estate assets requiring not only a high quantum of research but a focus on relationships across several levels. Birch highlights the importance of purchasing a rent roll together with its real estate agents who maintain important relationships with landlords.
“We get agents that come across and build the rent roll,” he says. “Effectively, you tag those properties to the agent.
“If you don’t get the sales agents and they go somewhere else, the risk is that they will sell those properties because the associated landlords are always very loyal to the agent,” he continues. “Without an ongoing relationship with the agent, it’s a lot harder to form personal connections with the landlord.”
Moving parts
According to Birch there are three key principles required in maintaining properties in a fund that has rent rolls at the heart of its asset list.
“I worked out pretty quickly that brand, personal relationships and an ongoing referral network are three key elements in building a rent roll,” he explained.
With so many moving parts, Birch says managing data and agency relationships are an essential feature in rent roll management as they ensure consistency and reliability.
“I get all the characteristics of that property, put them into a matrix and work out if it’s over the average because every property is different,” Birch says. “And then income is derived from letting fees and management fee rights to the portfolio of properties on the rent rolls.”
National platform
While poor performance and bad management have put active managers under the spotlight as they compete against passive funds, Birch is confident a wholesale property fund can outperform where others have struggled.
A natural advantage the yield fund has, he believes, is its broad coverage and ability to harness unique real estate opportunities across the country.
“We’ve got a competitive edge because the agency has a true national platform which is scalable,” he says. “It breaks down a lot of barriers for expansion that you have with the traditional franchise network.”
