Actively managing real estate assets can bring value.

Independent fund manager Resource Real Estate Global Property Securities (Australia) (RRE GPS) says Australian institutional investors need to take a ‘next-generation’ approach to real estate investing, and recognise property as dynamic businesses that actively drive value-creation, rather than passive building assets.

In Australia this week speaking with a range of institutional investors, New York-based RRE GPS Portfolio Manager Scott Crowe said property investing had changed enormously in recent years.

“Times have changed and as real estate companies have become more mature and dynamic. As such, the optimal approach to investment also needs to evolve. Rather than simply a static portfolio, real estate securities are actively managed and the focus of investors needs to be on the ability of a company to generate long term intrinsic value growth,” said Mr Crowe.

With the first phase of declining interest rates and stabilising fundamentals behind us, RRE GPS believes there has been a clear shift into the growth phase of the real estate cycle – as evident by improving global demand and limited new supply – delivering an opportunity  for Australian investors to generate returns and earnings growth from global property securities.

A ‘next generation’ approach – taking in a combination of factors including the business model, quality of management and the asset itself – offers a unique opportunity for investors in this growth phase.

“We believe intrinsic quality will generate returns in this new world of real-estate investing. It’s increasingly important to look at factors like quality of the balance sheet and quality of  management who can turn a B-grade property into an A-grade property, or enter a new asset class such as retirement homes,” added Mr Crowe.

Growth in global real estate multiplies while Australian sector still maturing

RRE GPS says understanding of global property opportunities among local investors has come a long way since the financial crisis; however Australian institutions were surprised to learn the global rate of growth of the sector in recent years.

In 2003, it is estimated the global securities universe held an approximate market capitalisation of US$600 billion, while today it holds around US$1 trillion (including emerging markets). RRE GPS predicts the size of the sector could grow by a further 50 per cent in the next five years.

RRE GPS Head of Asia Pacific and Portfolio Manager John Snowden believes Australian investors should ensure a more diversified portfolio through global property securities, and away from the Australian REIT sector due to its high concentration levels in a few large companies.

“Five companies account for over 80 per cent of the A-REIT market capitalisation, and Australia is a very small player globally, less than five per cent of the global real estate share market. We still have some way to go and the Australian sector is still maturing,” Mr Snowden said.

“RRE GPS uses a proven investment process and strong track record to search the broader universe of 300 stocks and filter through to an investment portfolio of 50 to 70 securities,” Mr Snowden concluded.

Resource Real Estate, a US based investment management company recently launched RRE GPS in early October via a joint venture with Channel Capital. Led by industry veterans Scott Crowe (New York) and John Snowden (Sydney), the joint venture offers local institutional investors access to quality global property security investments.

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Resource Real Estate joins forces with Channel Capital.

Resource Real Estate (RRE) today announced the launch of its institutional real estate global securities business via a joint venture with Channel Capital (Channel).

The joint venture known as RRE Global Property Securities (Australia), will offer global property securities investment from two key locations in Sydney and New York by expert portfolio managers, RRE’s Scott Crowe and John Snowden.

RRE is a wholly owned subsidiary of Resource America, a NASDAQ listed investment management company with around $15 billion under management. Channel will provide the funds management infrastructure to underpin the Australian investment offer.

“Resource Real Estate is excited to extend our global expertise in real estate and financial markets to Australian investors by offering the RRE Global Opportunity strategy,” said Alan Feldman, CEO of Resource Real Estate.

“In addition to our twenty year track record in direct real estate investment and loan origination, the combined experience of both Scott and John brings a global perspective to our real estate securities platform.”

Crowe joined RRE in 2012, and stalwart Australian global property securities investor, Snowden, was recently appointed to RRE’s global real estate team. With over 25 years in investment management, Snowden has held roles as Global Portfolio Manager for both Colonial First State and UBS. Snowden is responsible for the Asia Pacific region and Crowe, who oversees RRE’s entire real estate securities investing platform, is Portfolio Manager for the Americas and Europe.

Snowden and Crowe were former colleagues at UBS for many years and as a result, they share a common outlook and process methodology.

“The timing couldn’t be better for Scott and I to reunite. We see a great opportunity for investors to access the recovery phase of the global property cycle. Our approach selects the companies poised to benefit and is underpinned by a process developed over a decade to deliver strong returns for our clients.” said Mr Snowden.

The RRE Global Opportunity strategy provides institutional investors with unique access to global property securities by utilising Crowe and Snowden’s ‘next generation’ investment process.

Both have proven track records; Crowe developing his as Global Head of Real Estate Research at UBS and lead Global Portfolio Manager at Cohen & Steers in the US, while Snowden’s career includes responsibility for managing over $8 billion in funds under management for numerous specialist property funds in Australasia, London, Dublin, Hong Kong, Singapore and Japan.

“The RRE Global Opportunity Fund offers a highly differentiated approach. Our investment process identifies high quality growth companies at attractive valuations and our benchmark agnostic portfolio construction concentrates our client’s capital in the best opportunities globally,” said Mr Crowe.

The strategy will be officially launched to institutional investors with a series of meetings and events scheduled for late October.

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