Ben Walker

Australian technology that gathers real-time, location-aware customer data and behavioural insights in return for free high-speed wi-fi and an enhanced, tailored shopping centre experience has attracted a multimillion-dollar investment from Blue Sky Private Equity.

Shopper Media Group, Australia’s fastest growing digital out-of-home (OOH) media business, was set up in 2015 by former oOh! Media executives Ben Walker and Ed Couche and already counts blue chips like Coca Cola, Lion, Goodman Fielder, American Express and Johnson & Johnson as clients.

The company will use the funds from Blue Sky to support its plan to double its national footprint by installing its Smartlite TM digital advertising panels into more than 300 Australian shopping centres.

The panels, which are already installed in 150 shopping centres, currently reach more than 2.8 million shoppers per week, who have accessed the free high-speed wi-fi that captures key consumer demographics and behaviours. With the ability to ask shoppers specific questions, Shopper Media Group’s targeted data analytics and real-time consumer insights enable advertisers and shopping centres to deliver tailored information to improve consumers’ overall shopping experience.

Shopper Media Group currently hosts a database of more than 100,000 unique shoppers and plans to become Australia’s largest shopping centre consumer database in the near future.

Recognised in APAC CIO Outlook’s Top 10 Digital Technology Companies for 2017, Shopper Media Group’s intelligent Smartlite TM technology is at the forefront of worldwide location-aware wi-fi analytics, and primed to take advantage of the ‘peak smartphone environment’ forecast for Australia.

Recent Deloitte research found Australians are interacting with their smartphones 480 million times a day – an increase of more than eight per cent on 2015, while 59 per cent prefer to connect their smartphone using wi-fi instead of their mobile network.

Shopper Media Group CEO Ben Walker said Blue Sky immediately understood how the company was disrupting Australia’s very established OOH advertising market with innovative technology.

“Blue Sky is an innovative company like us, and the private equity and venture capital divisions have an established and proven 10-year track record with investments in successful tech businesses such as Vinomofo and Alcidion,” Mr Walker said.

Blue Sky Private Equity investment director Nick Miller said Shopper Media Group fitted Blue Sky’s portfolio as a tech-based company in a high-growth industry.

“Digital OOH media is Australia’s fastest growing media market, with 50 per cent per annum growth driven by digitisation, audience reach and performance,” Mr Miller said.

“Shopper Media Group has established itself as a player with 100 per cent digital reach in 150 shopping centres. Its experienced management team has launched the sector into a new phase with market leading technology that adds value for shopping centres and media buyers.”

Blue Sky Private Equity is a division of ASX 300 listed Blue Sky Alternative Investments Limited (ASX: BLA).

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Robert Shand

Blue Sky Alternative Investments (ASX: BLA) have announced its results for the half year ending 31 December 2016, reporting a significant rise in revenue, profitability, cash flow, margins and fee-earning assets under management (AUM).

Highlights include:

• underlying net profit after tax (NPAT) for 1H FY17 up 130 per cent to $10.1 million (1H FY16: $4.4 million);
• underlying EBITDA margins for 1H FY17 expanding to 41 per cent (1H FY16: 28 per cent)
• underlying income for the period up 53 per cent to $36.4 million (1H FY16: $23.8 million); and
  net operating cash flow for 1H FY17 up 200 per cent to $9.3 million (1H FY16: $3.1 million).

The company maintained it was on track to deliver underlying NPAT of $24 to $26 million in FY17, representing approximately 50 per cent growth on FY16.

Blue Sky’s fee-earning AUM at 31 December 2016 was $2.7 billion, with the company adding $1 billion in the last twelve months. The fund manager saw a significant rise in investments from Australian and overseas institutional investors, from 25 per cent to 37 per cent of its fee-earning AUM during the period – a trend that has continued in 2017 with Blue Sky announcing a new significant mandate in January.

Fee-earning AUM is expected to be between $3.1 and $3.3 billion by 30 June 2017. The company confirmed it was on track to meet or exceed its longer-term target of $5 billion by 30 June 2019.

The alternative asset manager outperformed market benchmarks in each of its asset classes – private equity and venture capital, private real estate, real assets and hedge funds – delivering investment performance of 16.4 per cent per annum net of fees since its inception more than ten years ago.

Blue Sky reported a robust balance sheet with net tangible assets of $134 million including a net cash position of $52.1 million. The strength of Blue Sky’s balance sheet has become a key strategic asset for the business attracting and investing alongside institutional investors, seeding new ventures, and moving quickly to secure new investment opportunities.

Blue Sky managing director Robert Shand said the company’s strong financial performance came down to three key drivers: the mainstreaming of alternatives, the company’s compelling ten-year track record and institutional backing.

“We have returned 16.4 per cent per annum net of fees over ten years to investors, and have won the endorsement of major institutions,” Mr Shand said.

“Long-term trends have seen investors increase their allocation to alternatives and we are benefiting from the same structural tailwinds as global alternative asset managers such as Blackstone and Partners Group.[1]

“While we have done well to grow to $2.7 billion in fee-earning AUM in our first ten years, we have barely scratched the surface. Australia’s funds management industry has $2.8 trillion under management, and with alternatives forecast to be our largest asset class in the next decade, the opportunity in front of us is enormous.” [2]

A McKinsey & Company report noted growth in alternative investments continued to outstrip that of traditional assets.

“The alts boom is likely to be one of the richest asset management growth opportunities in the years to come,” the international report states.[3]

Closer to home, Australia’s Future Fund allocates nearly 40 per cent of its portfolios to alternatives.[4]

“We continue to […] seek out and access pockets of opportunity particularly in our private market and
alternatives programs,” Future Fund managing director David Neal said.[5]

ABS data shows that over the last decade, the value of listed equities has treaded water, increasing from $1.66 trillion to just $1.69 trillion. Over the same period, the value of unlisted equities has increased by almost 50 per cent, from $1.96 trillion to $2.95 trillion. The size of unlisted equities in Australia today is approximately 74 per cent more than listed equities. [6]

“What investors have experienced in Australia over the last decade is that growth in private markets has far outstripped growth in public markets. As a business that has specialised in investing in private markets, we are uniquely positioned to capitalise on this growth,” Mr Shand concluded.

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Fabian Roche

The North American arm of Australia’s Blue Sky Alternative Investments (ASX:BLA) has formed a joint venture (JV) with the team behind Student Quarters, a specialist independent student housing investment manager with approximately 5,000 beds under management.

Atlanta-headquartered Student Quarters focuses on investing in properties that are within walking distance from large public university campuses in markets with strong enrolment and demographic trends.

The US is the world’s top destination for foreign students, closely followed by the UK, then Australia. JLL reports global tertiary enrolments are expected to rise rapidly to around 263 million by 2025 – up from 165 million in 2011.

With an estimated 2.4 million purpose built student housing beds for more than 20 million students, the US student housing market is still highly fragmented – with the top ten players owning approximately 10 per cent of the off-campus stock.

Blue Sky Alternative Investments US investment director Fabian Roche said student accommodation in the US was a highly attractive asset class with the potential for large portfolio transactions.

“The market’s fragmentation provides a great opportunity for aggregation, with strong yield opportunities along the way. We think the risk profile of student housing is highly attractive and remains underpriced,” Mr Roche said.

“Student housing is a resilient asset class as demonstrated by relatively steady occupancy and rental rates through the last recession. The long term fundamentals of college enrolment should provide a durable tailwind for the sector.

“We were very impressed with the entrepreneurialism and track record of the Student Quarters team. Their expertise and long-held relationships will be critical to finding high quality deals, and we felt they were a great fit for Blue Sky culturally.”

Student Quarters president Andy Feinour said the JV would build on the team’s considerable experience across development, core and value-add segments.

“Blue Sky has built a successful student accommodation platform in Australia and we look forward to drawing on our collective expertise over here in the US,” Mr Feinour said.

“Student Quarters is actively on the hunt for quality assets, but will continue to be quite selective. We know the markets we like and where we can add value – whether through repositioning, property upgrades or improved asset management.”

In Australia, Blue Sky launched its student accommodation division in 2015, opening its first site in Brisbane in July 2016. Earlier this year, the group formed a JV with Goldman Sachs to continue to develop quality student accommodation sites in Australia, with the JV subsequently acquiring a majority stake in leading Australian student accommodation operator The PAD.

In 2015, Blue Sky also launched Cove Property Group, a JV with US property investor Kevin Hoo, in order to acquire institutional-quality commercial property assets in New York.

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Andrew Champion

Blue Sky Alternatives Access Fund Limited (ASX:BAF) has announced a successfully completed $47 million capital raise through a one for three non-renounceable entitlement offer to existing investors and shortfall offer to new investors. The shortfall offer was opened on Thursday 10 November and closed on the same day heavily oversubscribed.

The funds raised will be used to continue to grow a diversified and actively managed portfolio of alternative investments providing shareholders with a meaningful yield as well as an attractive capital gain opportunity through a Listed Investment Company (LIC) structure.

Blue Sky Alternatives Access Fund director Andrew Champion said the strong support for the raise was due to a growing awareness around the benefits of alternatives as well as the unique nature of the fund’s product offering.

“Financial planners nationally are increasingly looking for attractive opportunities to diversify their client’s portfolios into alternative asset classes,” Mr Champion said.

“The Blue Sky Alternatives Access Fund is Australia’s only LIC that allows investors to make a strategic allocation to a diverse portfolio of directly managed alternative assets, making it more accessible and liquid than typical alternative asset investments.”

Alternatives are the fastest growing asset class in Australia. Funds under management allocated to alternatives increased seven per cent to $422 billion in the last financial year. In the past three years the asset class has grown 70 per cent, increasing its market share from 15 to 20 per cent.[1]

The Blue Sky Alternatives Access Fund’s asset allocation includes investments in Australian water entitlements, agricultural and water infrastructure assets, purpose-built student accommodation and medium density retirement living as well as private equity investments into Australian growth companies.

Since IPO in mid-2014, BAF’s portfolio has generated a compound annual return of 9 per cent per annum to 31 October 2016[2] over a period where the ASX200 Accumulation Index has delivered 3.9 per cent.

“We continue to see a strong flow of investment opportunities across all of Blue Sky’s alternative assets classes and the capital raised will allow us to continue to broaden and deepen our portfolio of alternative investments.” Mr Champion said.

Blue Sky advised the capital was likely to be fully deployed in the next three to five months.

The Blue Sky Alternatives Access Fund is managed by a wholly-owned subsidiary of ASX 300-listed Blue Sky Alternative Investments Limited (ASX: BLA). Blue Sky Alternative Investments has a track record of generating returns to investors across its funds of 16.7 per cent per annum net of fees since inception in 2006.

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Cove Property Group and Blue Sky Alternative Investments acquire another NY office tower.

Cove Property Group (Cove), a joint venture between Blue Sky Alternative Investments and US property investors led by Kevin Hoo, has signed an agreement to acquire its second asset, an office tower located at 441 Ninth Avenue in Manhattan, New York.

Having completed its first transaction earlier this year at 2 Rector Street, New York, this second acquisition marks a further important milestone in the development of Cove’s business.

The transaction value exceeds A$400 million and is expected to settle within the next two months. The agreement was signed on behalf of the joint venture investment vehicle managed by Cove. The majority of the equity for this investment vehicle will be provided by a North American based institutional investor.

441 Ninth Avenue is an existing eight story building located within a five minute walk of Penn Station, Hudson Yards and Manhattan West. Cove plans to fully redevelop the property into a Class A office tower in one of the Manhattan’s most rapidly expanding submarkets, which has already begun to benefit from a projected US$20 billion of private and public capital expenditure, and welcomed an influx of global blue chip tenants including KKR, Wells Fargo, Boston Consulting Group, Coach, JP Morgan and L’Oreal.

Blue Sky incoming managing director, Robert Shand, said the deal was the second high profile acquisition for Cove in just eight months.

“It’s an important milestone for Cove and for the development of our US operations, and it gives our investors a chance to gain access to New York’s real estate market,” Mr Shand said.

“This deal, paired with the expansion and venture capital we have executed in the US over the last two years, shows our New York office is gaining real momentum.”

“Partnering with Kevin gives us an insider advantage, while mitigating risk for our investors. His track record is impressive, having worked for prestigious US companies, including Savanna Real Estate,for more than a decade and closing a lot of major deals.”

Prior to Savanna, Mr Hoo was a director at Tishman Speyer Properties, one of the preeminent real estate companies in the world. Mr Hoo’s acquisition, development, design and construction roles saw him focusing on properties as iconic as Rockefeller Center and the MetLife building on Park Avenue. Before then, Mr Hoo was an associate director in the Real Estate Investment Banking Group at UBS AG in Sydney, where he was responsible for M&A and capital market transactions for REIT clients.

A University of Queensland graduate, Mr Hoo also holds an MBA from the Kellogg School of Management at Chicago’s Northwestern University

Blue Sky Alternative Investments Limited (‘Blue Sky’) holds a 38 per cent economic interest in Cove Property Group.

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Mark Sowerby

Ten years after starting Blue Sky Alternative Investments, founder Mark Sowerby will hand over the reins to the company’s current chief operating officer, Robert Shand, on 30 September 2016.

Mr Shand has been with Blue Sky since 2010, was promoted to COO in 2013, and is well known to Blue Sky’s investor and associate network. He will replace Mr Sowerby as managing director, backed by the existing team.

Mr Sowerby, who will remain an active advisor to the business and a significant shareholder, is stepping down to spend time with his family and increase his involvement in other projects with a positive social impact.

Mr Sowerby founded Blue Sky a decade ago as a private equity business providing expansion capital to growing small businesses.

The company has grown to become Australia’s only listed fund manager solely focussed on diversified alternative assets, including private equity and venture capital, real assets (primarily water and agriculture), private real estate and hedge funds.

Blue Sky listed on the ASX in 2012 and has grown its market capitalisation to nearly $600 million. Today Blue Sky has more than $2 billion in assets under management and has generated an internal rate of return (IRR) across its funds of 16.7 per cent per annum net of fees to the end of June 2016.

Blue Sky chair John Kain said Mr Sowerby had achieved a remarkable feat building Blue Sky from the ground up.

“Mark’s entrepreneurial vision and drive have shaped the business. To his great credit, Mark has built an extraordinary team with multiple layers of talent and experience, a team which can renew itself and continue to repay our investors’ trust through the decades ahead,” Mr Kain said.

“Rob’s three years as COO give him an unparalleled understanding of what makes our business tick. His leadership, vision and clarity of decision-making qualify him to drive Blue Sky and build on the foundations of our first 10 years.”

Mr Sowerby said Blue Sky had experienced incredible growth since inception.

“We have created a business which is more than just sustainable – it is fast growing, scalable and defensive – a unique combination reflected in our 10 year track record and position as one of Australia’s best performing listed companies over the past four and a half years,” Mr Sowerby said.

“My decision reflects the ongoing growth and performance we see in the business and team, the foundations of a strong balance sheet and investments, and the incredible structural tailwinds in the sector. The last few years we have grown at 50 per cent per annum, and we see no reason for that to slow down.

“The Blue Sky team has now unquestionably earned the right to take over the business. They are hard working, intelligent, empathetic and ethical. They understand why we are different, and the rules that made us who we are. They have lived it, experienced it, and now they own it.”

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Mark Sowerby

Blue Sky Alternative Investments Limited (ASX: BLA) has announced its results for the year ending 30 June 2016, reporting an underlying Net Profit After Tax (NPAT) of $16.3 million (up 57 per cent from $10.4 million in FY15) and a 44 per cent increase in revenue to $63.0 million (up from $43.6 million).

The company will pay a fully franked dividend of 16 cents per share to shareholders (record date: 2 September 2016; payment date: 16 September 2016).

Fee earning Assets Under Management (AUM) at 30 June 2016 grew to $2.1 billion, up from $1.35 billion at 30 June 2015. As expected, a number of investments in private equity and private real estate were successfully exited throughout the year.

Since inception in July 2006, Blue Sky has generated an internal rate of return (IRR) across its funds of 16.7 per cent per annum net of fees to the end of June 2016.

Managing director Mark Sowerby said the combination of a ten-year investment track record across the four major alternative asset classes, increased investor engagement across retail, wholesale and institutional clients, and continued strong deal flow would lead to further growth in fee earning AUM in FY17 and beyond.

“Reaching $2 billion in AUM this year was an important milestone for us as a business.The fact that most of this is invested in illiquid funds differentiates us from other local fund managers and provides an incredibly solid foundation for our future growth,” Mr Sowerby said.

“The Australian funds management industry has $2.6 trillion in funds under management today and this is anticipated to grow to $4.1 trillion over the next five years. By 2021, alternative assets are expected to be the largest investment class in Australia.”

Blue Sky is Australia’s only listed fund manager focused on a range of diversified alternative investments, including private equity and venture capital, real assets (primarily water and agriculture), private real estate and hedge funds.

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Since entering the accommodation market in 2013, Blue Sky Private Real Estate has enjoyed rapid growth in property management rights, amassing more than 2,000 rooms across Australia.

Blue Sky Private Real Estate investment director Andrew Lee said the sale to Mantra Group was a key part of Blue Sky’s accommodation strategy.

“Our strategy in this sector over the past few years has been to accumulate high yielding management contracts in favourable locations with upside rental and let pool potential. We purchased the Southport Central asset in 2014 following the announcement of a number of infrastructure projects in the local area and have since added a number of rooms to the let pool and driven rental growth in the backdrop of a growing Gold Coast market,” Mr Lee said.

“Mantra Group, a sector leader in the accommodation industry, was a standout choice for our sale of the asset, and provides a great outcome for our investors.”

Mantra Group CEO Bob East said the acquisition was in line with Mantra Group’s strategy to selectively grow its permanent rental business. The addition of the upmarket Southport Central is well timed to coincide with strong residential market conditions in the lead up to the Gold Coast 2018 Commonwealth Games.

“We’re very excited about this acquisition as it will open up additional growth prospects in the permanent rentals sector,” Mr East said.

“Southport Central is not only complementary to our existing portfolio, but also reinforces the strong momentum in our organic growth strategy and consistent ability to convert our pipeline.”

The $700 million Southport Central project was developed by high profile Gold Coast developers the Raptis Group between 2006 and 2009 and comprises 788 stylish and contemporary residential apartments across three towers.

Two outdoor pools, an indoor pool, spa, saunas, steam room, two gymnasiums, multiple entertaining areas and secure basement car parking as well as access to Southport’s central business district, Broadwater Parklands and public transport are also offered by the property.

Mantra Group’s acquisition of Southport Central is scheduled to settle on 31 August 2016 (subject to usual conditions).

Blue Sky Private Real Estate is a division of Blue Sky Alternative Investments (ASX:BLA).

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Readify’s management team will remain in place and it will be business as usual in terms of company operations.

Founded in 2002, Readify helps Australia’s biggest organisations manage and navigate shifts in technology, delivering custom application development, software deployment and IT consulting as well as managed services using smart cloud and Internet of Things technologies.

Blue Sky provided expansion capital in 2013 to allow the business to scale, form a strategic partnership with brand and user experience agency Folk and acquire a data analytics business in late 2015 to become Australia’s first development, design and data powerhouse.

Readify has seen double digit organic revenue growth per annum over the life of the investment and recently announced plans to establish an ‘IP Factory’ to capture and commercialise all the intellectual property it has created building solutions for clients over the last decade.

Blue Sky Private Equity investment director Nick Miller said the investment gave investors a chance to capitalise on fast evolving technology trends.

“It’s been great working alongside Readify for the last few years. We are proud to have helped the company grow, which in turn has paid off for our investors. We wish Graeme and the team all the best in this exciting new phase,” Mr Miller said.

Readify managing director Graeme Strange said the acquisition by Telstra was a huge vote of confidence.

“We’re excited by the opportunity to grow as part of Telstra. Readify has a proven record of creating innovative solutions with our customers and with Telstra’s scale, the opportunities are tremendously exciting,” Mr Strange said.

“It’s been great to have had Blue Sky’s partnership over the past few years, as they have supported our plans and acquisition activity. We now look forward to being an important part of Telstra’s innovative software and analytics offerings.”

Telstra executive director global enterprise and services, Michelle Bendschneider said the acquisition supports the company’s goal of curating market leading services with its customers.

“As we know, apps and software in general are playing an increasingly important role in businesses. Readify is recognised globally for its innovative software solutions and will further help us create software-led digital transformations with our customers,” Ms Bendschneider said.

Blue Sky Private Equity is a division of Blue Sky Alternative Investments (ASX: BLA).

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This first stage of Blue Sky’s capital raising was heavily over-subscribed. All eligible shareholders will now be able to participate in the second stage of the capital raising, a one for 10 non-renounceable entitlement offer to raise a further $21.7 million. This second stage of the raise has been fully underwritten by Ord Minnett and Morgans, who are acting as Joint Lead Managers to the capital raise.

Blue Sky will use the funds for ongoing co-investment in its managed funds and to demonstrate balance sheet scale to enhance conversion of potential institutional mandates.

Shares under the placement and entitlement offer have been offered at an issue price of $6.50, a discount of approximately nine per cent to the closing price of $7.16 on Tuesday 10 May 2016, the company’s last day of trading prior to going into a trading halt.

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