Welcome back to The Rated Change with York Wealth
Management. As advisors to some of the wealthiest
families in the country, The Rated Change is
a podcast designed to help you in the pursuit
of building long -term wealth through the insights
of some of the brightest minds in asset management.
I'm your host, Murdoch Gaddy, and in today's
broadcast, we're joined by Ryan Bass, founder
and managing director of PanGen Capital. Ryan
brings deep experience from the institutional
investment world, having spent 16 years at UniSuper.
where he oversaw more than $8 billion in property
transactions across direct real estate, unlisted
property funds, and listed A REITs. Earlier in
his career, he also helped establish MCS Property,
one of Australia's original syndicators, and
was one of the founding six behind iSelect before
choosing to focus on funds management and institutional
real estate. Could you imagine being one of the
founders that I select? It's massive. At the
rate of change, I must say we love conversations
with entrepreneurs who have operated at the highest
level and are now stepping out to solve a real
problem they've seen up close. Ryan's new venture,
Pangean Capital, is doing just that. After decades
inside a major super fund, he observed a key
issue. Some of the best performing, most stable
property assets in the country like core shopping
centers, CBD office towers, and logistics hubs
are largely inaccessible to wholesale investors.
These institutional grade opportunities are typically
locked behind $10 million minimums, strict mandates,
and a relationship -based entry. Through Pangen's
new fund of funds, the Pangen Australian Real
Estate Fund, P -A -R -E -F, Ryan is now making
those opportunities available to wholesale investors.
The fund will target returns of 8 % to 10 % per
annum, exposure to diversified unlisted property
funds managed by some managers such as DEXIS,
GPT, Charter Hall and Lendlease. and a structure
designed for monthly unit pricing and quarterly
income. Paref aims to deliver quality, stable,
and long -term performance with the flexibility
to expand across other high -caliber managers
as opportunities arise. This is about bringing
institutional -grade real estate to investors
who have historically been unable to access it,
which I quite like. In this conversation, please
join us as Ryan breaks down how the strategy
works, why now is such an attractive time in
the real estate cycle and how his fund is positioned
to benefit from the repricing in property markets,
good old -fashioned surging population and tightening
supply of premium commercial assets. We also
touch on the fund's mechanics, risk management,
the importance of manager independence and...
what Ryan learned deploying Kappa at the massive
scale he did inside Unisuper. So before we get
into the conversation, please remember this broadcast
is made for entertainment purposes only. I encourage
you to listen to the disclaimer at the end of
the broadcast and keep your feedback coming.
You can reach me at mgatty at ywm .com .au. If
you have any questions about the podcast, you
want to learn more, any of the guests that we've
had on or how, They may best work with your investment
policy. Please give me a call and York Wealth
Management will happily work with you solving
those problems. With that being said, I hope
you enjoy this conversation as much as I did.
So sit back, relax, and enjoy. Ryan Bass from
Panjan. Welcome to The Rate of Change with York
Orth Management. Thank you, and it's great to
be here. Thanks, Murdoch. Great to have you on.
I'm really glad a mutual colleague suggested
to have a chat with you. I find what you're doing
and your background really quite interesting.
So why don't we kick things off like we always
do and tell us a little bit about who is Ryan
Bass and how you got into finance? Thank you,
Murdoch. And it's an interesting journey. As
a kid, I always thought I would get into IT.
I was very much in that space. However, I got
an opportunity to do... essentially computer
science and law when I was at uni. And when I
was at uni, I met and started working for a fellow
called Julius Coleman, who was one of the founders
of MCS Property, which was one of the original
and largest property syndicators in the country.
So he had a legal background, but he started
essentially buying shopping centers for people
to invest in. He'd buy a few shopping centers,
put a fund together. It was extraordinarily successful
because he essentially bought well and he looked
after the investors and he looked after the assets
really well. And that grew to be one of the largest
property syndicators. This was probably in the
90s. So I sort of did my articles and then moved
straight into property funds management. I was
very much more a numbers person. my sort of IT
background, but the legal background was very
useful as well. So when I moved into MCF property,
we worked on a range of different, we did acquisitions.
It was a big team. We did some M &A activity.
and fundraising, a whole range of activities.
At the time, we were also working on essentially
a fund of funds called the Direct Property Fund.
There was a whole range of syndicates, and this
fund would sit on top and invest into the underlying
syndicates. And then when there was a listed
company, basically MCS's largest competitor,
Centro, basically acquired MCS in 2003. So I
moved over and I became the fund manager of that
fund of funds, the Centro Direct Property Fund,
which grew to be a $2 billion fund of funds invested
across all their syndicates. And we targeted
financial planners and family offices, instos,
et cetera. And it was also on the list on the
platforms like the NetWealth and the Hubs. And
in those days, the Macquarie route the BT wraps,
those sort of larger groups. So I then moved
to Unisuper in 2008. And I guess from there,
and I was joined as a senior member of the investment
team in the property space. And from there, we...
Firstly, it was an incredible transition to move
from essentially mainly in shopping centres and
the smaller end of town to really sort of the
big institutional capital. I mean, UniSuper now
is a $150 billion fund. It was about $25 billion
when I joined. And we're involved across all
sectors, office, retail, industrial. We invested
in direct properties. We developed direct properties.
We invested in these. institutional grade unlisted
funds and also A -REITs. I was an active A -REIT
manager for the last 10 years of my 16 years
at UniSuper. So there's a quick... I guess, snapshot
of my career. I think it's probably worth mentioning
when I was at Unisuper, I was involved in or
managed over $8 billion of equity transactions.
So that's buying assets, selling assets, investing
into funds, and also through the A -REITs, listed
property as well. Yes. So that's fun. Let's unpack
there. Like I was saying, I love guys and girls
that come on that have not a straight path into
finance. Isn't it interesting how you do tech,
you do law? And then you're like, oh, that may
have been a waste of time. You fast forward all
the way to today and tech is so freaking important.
And then when it comes down to contracts, if
anyone's out there studying law and go, I want
to become a lawyer, consider essentially financial
services because it's just contract heavy, isn't
it? Everything's a deal. Everything's a contract.
Everything's the fine print. And then the efficiencies
of IT, it's amazing how they both work hand in
hand, isn't it? Have you found that? Yeah, no,
absolutely. And I think my sort of IT and data
background, actually, I've got a bit of an entrepreneurial
background. I was one of the founding... founders
of iSelect back in the... Sorry, you buried the
lead there. You were one of the founders of iSelect?
Yeah. So essentially in the late 90s, I got together
with a group of people to, you know, workshop
some ideas. And, you know, it was the tech boom
at the time. And we basically came up with that
product, with that company. I didn't stay there
too long because I was focused on my property
fund sort of career. But, yeah, I was one of
the – I think it was one of the original six
who went off. And as we know, Damien Waller,
he ended up sort of running that company and
did very well out of it from his part. So, yeah,
I've got a bit of an entrepreneurial sort of
background and I do enjoy a bit of tech. But
to answer your question, I think I – IT and law
and having a good sort of, I've been very sort
of quantitative as well. I think they're sort
of good combinations for investing in any space
because you can use that legal and IT or that
sort of data background to essentially assist
you with your investment decision processes and
your thinking. Yeah, brilliant. We'll get on
to Pangean Capital, what you're doing now for
a sec. I want to lean into this a bit more. So
you mentioned, so you hit the private side with
all the shopping centers doing the private transactions,
which I would guess you had a little bit more
leniency because smaller group of people. What's
it like? I've never actually had a great conversation
with someone that's actually, you know, been
able to choose the investments we go into the
major super funds on the property side. Like,
how does that process work? I suppose what I'm
getting at, is it substantially more regulated?
Is there the criteria a lot more difficult or
are you finding that you're... The group has
a relied upon number of groups, I don't know,
CBRE or someone of the equivalent where you get
constant deal flow through and it's more like
you can only deal with these particular people
or you must lend seven or eight times to someone
to get a track record as people before you can
sit up the equity piece. Because a lot of people
that listen to this podcast, we've had a lot
of great people for private credit or property
on. before it's probably listening people listening
to this going you know we would love to have
a crack at you know getting into the you know
the ilks of uh you know uni super but what's
what's the process like how do you consider a
deal like how you know how does someone present
a transaction because that's for me that's just
mind -boggling because what you what you ran
eight billion dollars you oversaw eight billion
dollars worth of acquisitions of transactions
that's huge Yeah, I think that's a really good
question. And when I started at Unisuper, there
was just basically two of us in the property
team. There was obviously a larger investment
team. And we would rely heavily on existing relationships
and managers. But essentially, we would see hundreds
of deals come across our desk every year. And
I guess you sort of get a feel for the type of
deal. that you're looking for and the type of
structures that you're looking for. And generally,
that would be our sort of experience and our
relationships with managers. And I think Unisuper
had a pretty interesting structure from its property.
side as well. We had a mandate with a group,
AMP Capital, and they would run their direct,
they would run the direct assets. So often there
would be... deals that would come up and we would
ask the AMP capital transactions team to essentially
run the numbers or do all the due diligence on
the direct deals. But occasionally there were
a lot of, you know, funds deals that we would
look at as well and investment funds. And that
was our sort of expertise or speciality in assessing
various funds. And essentially we had filters.
Is it the right, does it have the right assets
that we want to target, the right quality assets?
Is it in the right? right type of structure that
we're happy with, that gives us as the investor
the right sort of controls? And also, is it the
right manager? So in some ways, it's a fairly,
I guess, simple philosophy, getting the right
assets in the right structure with the right
manager. So hearing that, your background's predominantly
been... Less on, you know, finding out whether
or not you want to specifically purchase a shopping
center or specifically purchase, you know, one
particular office building or, you know, an industrial
complex, right? So not specifically a transaction.
You're saying that your main many years of experience
has been on assessing the acquisition of fund
managers to essentially capture a basket in a
particular property and a subcategory, you know,
asset class. Is that what you're saying? Like
the $8 billion which you oversaw, was that purchasing
fund of funds or were you physically going out
and buying, you know, a new Woolworths goes in
and you're looking at that large development
or, you know, the new airports going in in Sydney,
you know, you're looking at essentially purchasing
that and then managing that or the Sunshine Airport,
you know what I mean? I'm just trying to get
an idea of that. I think it was a combination
of those. I mean, with direct deals, we would
tend to, I guess, vet the deals. initially. And
if there was interest, then we might sort of
use our managers, like at the time our direct
manager was IMP Capital, or we'd use other managers
to essentially do the heavy lifting in terms
of the due diligence and legal and negotiations.
However, you know, we'd always sort of sit at
the top and, you know, make sure that the deal
sort of worked for our members. nice like uh
see when i was at a university like yourself
i did a bachelor of design and computing thought
it was a waste of time that's why i'm laughing
about it just saying how funny you do a degree
and then you fast forward and it's just pretty
much everything's tech right but um i was in
the architecture facility and the funniest thing
about architecture is you know you look back
in your career with all my friends there's always
one building or one deal that someone's done
you can you go i did that you know when you're
telling your kids your grandkids so from your
days at uni super you know what what deal um
what property essentially, what got built that
you go, you know, that was awesome. What was
your favorite? Wow. There's a lot to think about
there. Probably one of the most interesting deals
that really occurred over probably the better
part of a decade was Unisuper. co -owned Caranup
Shopping Centre with Westfield, with Westfield
Group. That's, you know, one of the biggest shopping
centres in Perth. And ultimately, it ended up
that, and that shopping centre was managed by
AMP Capital. And ultimately, Westfield wanted
a management role. In the end, that... That property,
in order to work out the structure of the ownership
structure, it ended up going to the High Court
and essentially Unisuper sort of won that case
and then essentially bought out the Westfield
stake. And then from there, it was able to...
I think it was an $800 million or $900 million
development for that asset, which I would say
now is without doubt the best shopping centre
in Perth by a country mile. It's kind of the
Chadston of Perth, so to speak, and it's an absolutely
brilliant asset. So I think that was a... pretty
amazing deal that we did for, that Unisuper property
team did for its members. That's pretty cool.
We went to the high court and then ended up doing
an $800 million development. Love it. I love
it. So Pangean Capital, when did it begin? Who's
Pangean Capital? What's the philosophy behind
it? What are you trying to achieve? What's happening
with Pangean Capital? Sure. So I guess when I
moved to Unisuper, I was blown away by the quality
of assets that a big institution like Unisuper
can get access to. And compared to what smaller
investors, I presume like yourself and I, can
get access to, incredibly different type of quality
type structures. One of the areas that Unisoup
and a lot of these big institutions invest in
is called the unlisted property funds. They're
institutional grade unlisted property funds run
by managers such as Charter Hall and Dexus and
GPT, Lend Lease, ISPT. And these funds have been
operating for decades. They own, honestly, some
of the best... commercial property that you can
buy in Australia because they've amassed these
portfolios over decades they've curated them
they've developed them and these funds are simply
not available to small investors because typically
you need 10 million dollars or more to get into
them and I always thought well why can't small
investors get access to these incredible funds
and To my knowledge, this is not really available
to small investors. So essentially, and this
is something I've been thinking about for many
years. And that's why when I started PanGen,
I wanted to almost like democratize these incredible
funds by creating a fund of funds that allows
smaller investors access to these institutional
grade property funds. For people not familiar
with a fund of funds, what is a fund of funds?
It's a pretty simple structure in the sense that
it's a fund that aggregates or pulls capital
from investors to then invest into other funds.
And in this case, our fund invests in these institutional
grade funds that... collectively own almost $100
billion of prime -grade commercial property,
that's shopping centers, great logistics assets,
and office buildings. And there's about $60 or
$70 billion of equity in these funds. They've
been, as I said, operating for decades, and traditional
investors have been the groups like Unisuper
of the world. What's the ticket size to get into
these? Typically $10 million, but it's not just
the ticket size. These funds... You need to go
through fairly strict criteria to ensure that
they maintain their, I guess, there's a number
of technical reasons, but their qualified status
for the investors. So there's a few sort of...
I guess, hurdles. And it's not just a big ticket
size to get into them. So that's what I was trying
to work out. So everyone knows we use NetWealth.
Some of our friends use Mason Stevens, Premium,
other very Hub24 good platforms. And they do
have a lot of access to high -grade property
portfolios. But some families have got $10, $20,
$30 million essentially sitting there. with some
of these funds or $100 million, right? So if
you've got $100 million in an account, you're
an ultra high net worth, you know, Australian
investor, you know, the question they're probably
asking is, well, I've got $10 million, you know,
why can't I buy net wealth? And net wealth is
an institution, you know, the money's held under
custody. um you know why can't and look it's
just i'm just essentially you know asking the
question that everyone's asking right is yeah
yeah why can't i access you know these these
transactions are you saying that based on the
criteria they actually just physically can't
or like what what is some what is the what is
the opportunity is this like literally like a
boys club as in you can't get in unless or if
you have the money and you're an institution
you can And there's a workaround. That's what
I'm trying to understand. I think it's about
not just the check size and also complying with
the entry criteria of these funds, but it's also
understanding how they operate as well. You can't
just simply go in and out of the funds. You've
got to understand how the liquidity mechanisms
work. Some of these funds have preemptives in
terms of when they're raising equity or if you
want to sell units. And yeah, so I think it's
not just the ability to get into these funds,
but it's the ability to understand how they operate.
And as I said, they're not simply ATMs. You can't
get in or out very easily. You've got to understand
how the liquidity mechanisms work as well. So
it doesn't suit a lot of investors who aren't
institutions or understand how these funds operate.
Right. Okay, so that's on that side. But why
don't we just discuss the actual opportunity
here. So the fund itself is the Panjan Australian
Real Estate Fund, P -A -R -E -F. Parif, yeah.
Parif. Parif. So can we just unpack? the fund
how it's structured the mechanics of because
you're mentioning you know the actual underlying
allocation which you're going to make is a whole
bunch of restrictions but you know what are the
duration restrictions the target returns like
what are the mechanics of this fund no absolutely
so the investment strategy of the fund is to
invest in these these underlying real estate
funds that are essentially core real estate funds
what does core mean that means established income
producing prime grade real estate with limited
development okay so you're not taking a lot of
development risk. You're buying assets such as
Gateway in Sydney. Let's say that's the DEXA's
fund. You're buying potentially High Point Shopping
Centre in Melbourne. You're buying some really
prime logistics assets. And as I said, with limited
development, there's always a bit of development
in these funds. So our fund essentially offers...
And the underlying funds are really... They've
got very high governance levels and low gearing.
High governance means that, you know, there's
really good alignment between the investors and
the managers. There's a really good transparency.
So investors can get... really good access to
the information and to the fund managers of these
funds. And pricing, part of the governance is
the pricing of these funds. Many of the funds
are actually pricing the underlying assets. They
get a full valuation very frequently. Some of
them even value the entire portfolio every quarter
externally, which gives investors a lot of comfort
that the price is sound. These funds also tend
to price monthly. So essentially, our fund will
take the pricing of the underlying funds on a
monthly basis and our fund will be priced on
a monthly basis. Generally, the underlying funds
pay quarterly distribution, so we'll be paying
quarterly distributions as well. And there'll
be a sort of reinvestment ability as well into
our fund. And the... Yeah, so I think that's
kind of at a high level sort of how these work.
Now, in terms of how we construct the portfolio,
we essentially like our fund to be diversified
across the main three food groups of retail,
industrial and office and across a number of
managers. So we're getting good diversification
by properties and by managers and sectors. What's
the performance been on these funds and what
are you targeting? So our target return is a
total return of 8 % to 10 % over the medium to
long term. And why we came up with that sort
of target return essentially starts with how
the underlying properties are valued, the sort
of the expectation of... what the properties
will deliver on an ungeared basis. And then that's
basically the income with a bit of rental growth.
There could be some development upside or some
refurbishment upside. So that creates an ungeared
return. These funds are conservatively geared.
So our model portfolio targets probably 20 %
to 25 % gearing. So that adds a little bit of
return on top of that, less the fees of the underlying
funds. And our fees comes to a target return.
We would have 8 % to 10%. What are your fees
on it and what are their fees? Okay. Our fees
are 60 .6 % of NAV plus costs. And then there's
a performance fee of essentially 15 % above a
fixed 9 % return hurdle. So we believe that the
fee structure in our fund is highly competitive
in the marketplace. We also... The underlying
funds, because they're massive institutional
funds and obviously institutional investors are
very fee sensitive, you know, the underlying
fees are, let's say, circa around sort of 60
basis points on an average basis. So when you
layer up our fees and their fees, it's probably
around 1 .3, which, and I think the key difference
is that. And this is probably what I haven't
mentioned, but I think a lot of investors recognize
this. These funds, these underlying funds have
held the properties, a lot of their portfolio
for sometimes for decades. So they've kind of
written off all the acquisition costs like stamp
duty, let's call it 6%. So essentially when you're
entering into many of these funds, you're entering
in essentially at NAV. So, you know, let's say
that, you know, 6 % stamp duty over a 10 -year
period would add, let's call it 60 or 70 basis
points of additional return to your, you know,
to your ungeared return had you, when you don't
sort of pay those acquisition costs. So that
is a real benefit. And I think, you know, people
need to think about fees and costs as well. Got
it. So the opportunity is to get access to something
that you generally can't, right, in a format
that's simple and easy that can essentially fit
in a platform. That's pretty much the gist of
it. And who are the main competitors in this
space that you're going up against? There has
to be one or two or someone that's, you know,
what's the expression in the university? If you
have an idea, chances are someone else has had
it. So you go find their idea and go, what did
they do wrong? And then you evolve from there.
That's university. Welcome to uni. Yeah, absolutely.
I don't believe there's a product like this on
the market. And I'm quite surprised about that.
Maybe I know that there's been a few of the underlying
managers who have tried to put together structures
that allow smaller investors access to these
institutional sort of great funds. The problem
with a manager doing that is that they'll tend
to obviously be beholden to their funds. So I
think that's a key difference with our... our
product is that we're not beholden to any manager.
We're going to simply invest based on the best
funds that we can find at the time, whether it's
a DEXA fund or GPT fund or LendLease fund or
Muvac fund or the like. So it has been tried.
I think managers have tried it in the past, but
there's nothing really that I can think of that
is similar to this. fund it really is quite a
unique product in the marketplace and i guess
it brings together my skills of running a fund
of funds as well as being an institutional property
investor it kind of blends those two together
that makes a lot of sense but to your point um
you know regarding it gives you the capacity
to choose which funds to be in at the right time
when you want to do it right you're kicking off
this fund with targeting three main um fund allocations
right so what are the three funds why don't we
just start with one we'll go we'll go through
because if i ask three we kind of get forget
whether you're sure that is so what what's the
first one and you know what's the macro economic
rationale and rhyme and reason for that because
i heard actually why don't we begin with dexys
because you know i i use that building which
essentially and like out of all the buildings
in you know office space you know i find it very
interesting that you chose that building and
you've got the capacity to go all the way across
australia and you've chosen sydney right and
then ever since the you know we had what we've
had covid we've had the gfc we've had you know
occupancy rates down on um uh on you know office
space right so why specifically the dex's portfolio
and targeting you know that building i find that
you know that quite interesting yeah so um firstly
there's uh in the the institutional property
fund space there's i think 15 or 15 or 20 of
these funds they own about 100 billion dollars
of property circa 60 70 bill of equity so There's
probably about five or six funds that we really
like and we want to target initially. And the
Texas Wholesale Property Fund is definitely one
of those funds that we like. It's a diversified
portfolio. It's actually got almost $13 billion
of assets, of property assets, almost 50 properties.
the the office building and it's across office
retail and industrial so one of the office assets
is gateway which is the building you're in right
so sorry my apologies yeah because you i thought
you were saying that essentially dex has got
a number of vehicles in which you know one is
just that that office building so this is a fund
which has 50 of dex's office almost 50. Well,
it's not just office. It's also retail. It's
got Westfield shopping centers like Westfield
Miranda. It's got, you know, it's doing some
developments like the Waterfront Place development
in Brisbane. It's got some really great logistics
assets like there's a big industrial state in
Melbourne called Ravenhall. It's developed and
had, you know, really great sort of returns to
investors for that. So it's really a high quality
wholesale, sorry, high quality. diversified portfolio
with a great manager and some really great assets.
And, you know, one of the assets is Gateway.
And in particular, I do like that the DEXA's
fund, overall, its asset quality is very good.
And its office assets like Gateway and Key Quarter
Tower Waterfront Place, they had some of the
best office buildings in the best locations in
the country. What's happening with the office
space market? Is it a, do you have to, are some
doing better than others? Like, you know, I've
noticed that there's always a discount running
around Sydney CBD of people trying to get bums
on seats in particular buildings. But others
are, you know, they're always a full occupancy.
I think the new Salesforce towers come out, et
cetera, et cetera. What's happening in that space?
So I think office has definitely been hit. really
hard with COVID. And ultimately, you've got to
be really selective in which office assets you
want to own. You want to own Gateway. in the
city, in the, you know, the heart of the CBD
precinct in Sydney or Key Quarter Tower, Waterfront
Place, where you want to be on the Paris end
of Collins Street, like 80 Collins Street. Those
are the places where tenants want to be. They're
great office towers and, you know, the investment
bankers, the lawyers, the accountants, the rainmakers,
they want to be there and that's where the staff
want to be. So, and they've got the right amenity
in the right location. Where you've got to be
a bit careful of is kind of the lower quality
assets, office buildings, the B and C grade assets
or even the A grade assets, but in the wrong
parts of town. People just don't want to be there.
You don't want to be necessarily down parts of
St Kilda Road or down parts of Docklands in Melbourne.
I think it's kind of – you ask a lot of office
owners, and it's all about bifurcation. There's
the haves and the have -nots, and you really
want to be in the locations and the properties
where people want to be, and that's very much
the case with office. It's quite interesting
what's happening. I really want to get into interest
rates and the impact of the cutting. and then
absolutely what's happening with tariffs in the
States and the whole dollar and all the fun stuff.
But before I do that, I forget, what's the second
investment you're looking at and why? We've got
a number of funds that we're targeting. I also
like, for example, the GPT Wholesale Shopping
Centre Fund. So that fund, it's got about $3
.5 billion of shopping centres. Its biggest...
probably best quality asset is High Point Shopping
Centre in Melbourne. That's in the western suburbs
of Melbourne, strongly growing catchment. And
it's got 420 retailers. That centre's effectively
full. There's tenants in there, there are retailers
in there who want to expand, and there's retailers
not in that centre who want to get in. So that's
a pretty good place if you're a landlord. And
I think that... that centre has got a very long
and good runway for growth. It's got near -term
opportunities, refurbishment, but it's probably
got longer -term sort of opportunities to build
more retail space and possibly there might be
even mixed use. So that fund has also recently
acquired Rouse Hill Town Centre in the western
suburbs of Sydney, very strongly growing catchment
as well. The manager's actually doing a $200
million development on that asset currently.
The GPT fund owns half of that. So there'll be
some development profits that'll sort of flow
through into that fund as that development completes
and de -risks. And I think that's one of the
key elements of a lot of these funds, that you're
buying established income -producing properties,
but there's always opportunities to add value
through development. And door number three? Number
three, we like industrial. We like logistics.
And there's two really great logistics funds
that we've been looking at. One of them is the
Lendlease APPF Industrial Fund. That's got over
40 properties. It's got a really exceptional...
portfolio of infill logistics locations. The
manager is a very sort of strong manager. That
fund's been, I think, running since the 90s.
So it's continually curated the portfolio. And
the other fund we like in the industrial space
is the Charterhall Prime Industrial Fund. Now,
this is a massive $12 billion in logistics portfolio.
It started... I think in 2007, it's developed
a lot of its own assets. And I guess one of the
differences to being, you know, what we often
see with property developers, these core funds,
when they develop, they essentially... build
to own or develop to core, essentially. So they
would sometimes acquire land, go through the
process of zoning, develop the properties, and
the profits will be kept by investors, and the
investors in the fund will then own that asset
as a core asset. So I think that that's one of
the key differences as well with these funds.
They often build... core products for the benefit
of their members rather than trying to buy some
land, do the development and then flog it off
and do the next product. And I think that that
process actually is very efficient as well from
a... let's call it a stamp duty sort of perspective.
You know, you're buying the land and then you're
developing and then you sort of keep the profits
within the fund. So I think that those two funds
I really like in the industrial space. So when
you say industrial... What specifically is underneath
that? Like, are we talking, you know, ports?
Are we talking, you know, like Amazon style warehouses?
You having a crack at the airports? Like, you
know, what are we doing here? Or are these like
the light industrial? Like, are you having to
go at North Harbor? Like, you know what I mean?
Like, what does it mean when these people say
industrial? So I think that the newer version
is called logistics. They're essentially these
big sheds, often on - Like the Amazon -style
sheds. Right now, up Queensland way, pretty much
from Brisbane or Gold Coast all the way up to
Noosa, you've got everyone's rotated out of Sydney
to Melbourne and gone and then taken a job. And
they're just practically - Every bit of farmland
is being converted into some form of light industrial
or heavy industrial or a shopping center or a
Crestmator rip switch. Woolworths is landing
there. Is it that type of stuff? Look, it's more
the larger logistics. warehouses or sheds i mean
they can range from you know let's call it you
know 10 or 10 or 20 000 square meters to you
know 80 to 100 000 square meters which which
is which is huge you think about um uh you know
like an 80 i've been into an 80 000 square meter
shed there's one there's a woolies distribution
center i think in in melbourne and and that's
just Absolutely, you know, gigantic. So it's
those type of assets that they would target as
essentially logistics assets. However, some of
the properties I've been in, there's been, I
think, steelworks. There's been, you know, true
industrial type uses as well. But a lot of these
are logistics assets where, you know, goods get
shipped in like an Amazon warehouse. It gets
held in the warehouse. and distribute it out.
Yeah, which is pretty much the backbone of how
everything works these days, right? You've got
a main distribution hub that's 80 ,000 square
metres and then you've got the smaller ones,
20, to essentially decrease the time which holds
a small amount of stock so everything moves around.
It's kind of a hub -and -spoke model that some
of the logistics groups use. You're right. In
China, it's down to, I think, you know an hour
there's like one an hour between every one like
here it's a couple of hours but i'm just do you
reckon that essentially we're going to go the
path of china and all these hubs are just going
to kind of get closer to close like nodules you
know connecting and making things quicker and
more efficient well i think i i think yes i think
that's a likely outcome and that hub and spoke
model um is probably where some of these groups
will have that massive distribution center with
the smaller centers closer to the consumer in
the infill. And I think that's having the mix
of those assets. There's really big sheds and
then the smaller sheds in infill locations is
probably a good strategy. And both those funds
that I talk about, they sort of complement each
other in some ways. How's the contracts work?
So are these being built? Let me rephrase. When
a deal's done, are they building the train tracks
hoping a train comes or are they getting essentially
a contractor, a tender from say Woolworths or
Amazon requesting them to find space to build
in a particular and help us find a deal? How
are these? And then essentially they take the
tenancy. What are these transactions? So I think
when you're probably talking about a new development
of a shed. So there's a new thing. Or it might
not be new. So there's something currently existing.
What I'm trying to understand is the property
itself with essentially the logistic shed, who
owns it? Is it a JV? Is it a lease agreement?
And where are we going to be going with this
is essentially the risks associated to if the
market takes a hit, we get another COVID event
and everyone has to work from home again. I'm
just trying to understand how are these – because
people don't really think about the risks and
rewards based on these types of questions, but
you're talking about – You know, bond rate over
in the States, they tried to cut it from five
down to four. And then the Chinese said nine
was the largest trading day in bonds we've ever
seen in our entire life, just shook markets.
If things change, which are happening at a, you
know, regimes are changing on a global scale
and potentially the domestic impacts, right,
of those changes can greatly impact the consumer
nature and thus the credit markets and just have
like a domino impact on. these particular assets
and when looking at that i'm just trying to understand
you can get a very good idea of potentially how
something may be impacted depending on how the
contracts were agreed you know on the way and
who's essentially the tenancy which is paying
the bill to ensure that these things don't have
a problem so i'm just trying to get an idea since
you're looking at these quite heavily like you
know how what are these things how are these
things contracted Yeah. So let's take an example
of, let's say there's the Lendlease Fund owns
a 20 ,000 square meter shed in Trugganina in
Melbourne, and that's got a five -year lease
to toll. holdings yeah i don't know if that's
the case i'm just sort of making making it up
so regardless of what happens to tariffs or trump
you know there's still a a lease in place uh
between toll and uh the owner of that that building
and and toll being a corporate, has to pay the
rent until the term expires. Okay. The key thing
is when that shed, when there's an expiry coming
up, then obviously the landlord needs to negotiate
with the tenant about whether they renew or whether
that tenant goes to another place. But generally...
And the rental terms depend on the market conditions,
so the economic growth. Is that shed the right
sort of shed for that tenant? Is it in the right
location? Does it have the right amenity? Does
it have the right access to... to transport.
And also that tenant will sort of think carefully
about the cost of moving its facility from that
shed to another shed. So there's a whole lot
of things that go into the mix when there's a
re -leasing deal taking place. Generally, as
I said, if you've got a shed that's leased to
a corporate for five or 10 years, that income,
that rental income is going to be very stable
and it's very unlikely with these large tenants
that they're simply going to default. I hear
what you're saying and that makes a lot of sense.
What I'm trying to work out is in their portfolio,
what percentage of the portfolio do they own
outright? What I'm trying to understand is do
they own 100 % outright and then everything is
essentially a lease agreement which they have
to work out or are there deals where essentially
it might be a JV with Amazon, I don't know, where
it's a 50 -50 JV because they can't be arsed
building it but they want to essentially – what
I'm trying to work out is because if it's 100
% leased out and those things – you know, end
or, you know, the winds change, then you have
an asset potentially that might not be leased,
which is exactly what we're seeing in Sydney
CBD. People thought that everyone's going to
go to work for Sydney CBD for the rest of their
lives. COVID happened, work from home, the capacity
to just work out a noose here and not care and
still run an empire. I'm just saying when things
change, like these contracts, do they own them
100 % or they're part owned or what's the structure?
So it depends on the fund. Most industrial assets
typically have a lower ticket size. So many of
these funds own, let's say that Traganina shed,
it'll own it 100%. It might be a $30 or $40 million
shed. When it comes to the very large assets,
sometimes there's a joint venture. Let's say
the Charter Hall Fund might own 50 % of that
shed with maybe another Charter Hall vehicle
or another investor. So there's generally a separation
between the property owners, the landlords and
the tenants. So you tend not to have many tenants.
owning or these big corporate tenants owning
part of the shed because you know their return
on equity is based on their business they've
got a different return hurdle than owning property
it's it's kind of a you know they'd rather just
simply be a be a tenant and and pay the rent
rather than you know sort of get access the returns
of property yeah it's quite interesting I love
these types of conversations. You see something
and then you keep peeling the layers of the onion
back. It's like, okay, what's really underneath
this? Buffett's expression, you'll see if someone's
swimming naked when the tide goes out. That's
right. You never know. Look, on the risks front,
a lot's changing in the macro landscape as I
brought up before. Where are we, I suppose, in
the cycle of these large… industrial, commercial,
shopping, you know, essentially, you know, office
space buildings, what part of the cycle are we
in? So I think we're actually in an extremely
attractive cycle for buying prime grade Australian
real estate for a number of reasons. Number one
is these assets have repriced significantly.
If you could wind back the clock, let's say three
years, where interest rates were at record lows,
the yields or the cap rates of these properties
were also at record lows. So essentially... To
give you an idea, our target portfolio, the cap
rate or yield of the target portfolio in our
target portfolio is about 5 .7%. That's essentially
the yield of the properties. If you wind the
clock back, let's call it three years, that...
Similar portfolio would have been priced at around
4 .5 % to 4 .75 % on a yield basis. So the yields
have blown out significantly. In fact, we've
seen, particularly with office, we've seen some
office buildings down 15%, 20 % or more in value.
And then you think about where we are in the
cycle. We've already seen two interest rate cuts.
And obviously, falling interest rates is a really
positive sign for property because it lowers
the interest expense of owners. It changes the
equation for buyers. There might be some buyers
who are happy to now use a bit more debt. And
as a result, we're actually seeing increasing
property transaction activity in these properties
as well. I mean, to give you an idea, a few,
it would have been a month or two ago, a Japanese
investor, Dai Baru, just bought a $600 million,
spent $600 million on a big office tower in Sydney.
I saw that. Apparently, it was the biggest transaction
for a very long time. Yeah, and I think more
recently Investor, which is one that has recently
transacted as well. So there's also been increasing
interest in logistics. There's been a lot of
interest over the past few years, and that's
increasing as well. And also retail, we're seeing
a number of shopping centers transact as well.
stabilizing interest rate environment, more attractive
pricing, and increasing property transaction
activity, they tend to be good signs for the
outlook of how properties are priced going forward.
that's on the one side. On the other side, we
actually believe that there's good property fundamentals
for the really high quality assets. So for example,
occupancy in high quality shopping centres like
High Point and also the very high quality industrial
assets is extremely high, getting close to sort
of 97, 98, sometimes 99 % occupancy. And we're
also seeing good and growing strong occupancy
for the right sort of office assets like the
Gateway Towers in Sydney and the Key Quarter
Towers and in Brisbane and to a lesser extent
Melbourne. I think Melbourne's lagging a bit.
So if you're getting the right assets, you're
getting good occupancy. And then you've got...
The supply outlook, the outlook for new supply
is lower than it was in past. And that's because,
as you're probably aware, it's really expensive
to build. You know, construction costs, development
costs are so high. So that's putting a lid on
new supply. Then that offsets with we've got
population growth. There's still more and more
people coming to live in Australia. I think CBRE,
which is a major property group, they predict
that over 4 million people, 4 million new people
will be living in Australia over the next 10
years. And that's going to drive significant
demand for new space across all sectors, resi,
healthcare. Did you say 4 million in 10 years?
That's CBRE's prediction, 15%. Yeah, I think
the Doge ran an analysis and used Australia as
a case study. I think they just released this
week that last year alone on our populations
of, what, 33 or 34 million, we had a million
inflows last year. So we grew by a mil. So based
on those numbers, if nothing changes, I think
they're actually indicating that at a bare minimum,
we'll potentially grow by 10 million in the next
10 years. And that's not including birth rate.
That's purely just... new inhabitants coming
in yeah and and that's all that's going to drive
a lot of demand for space so you've got sort
of the um uh you've got demand for space and
it's expensive to build uh and i mean to put
some numbers into in into that when when you're
looking at um industrial, CBRE predict that for
every person who comes, a new person who lives
in Australia, that drives demand, that creates
an incremental four and a half square metres
of space. Putting that into numbers, that's like
building 950 MCG playing fields of new sheds
over the next 10 years. And that's a pretty big
number. In retail, That's like building, and
retail, they're saying for every new person you
need an office, about 0 .8 of a square meter
of new space. So in retail, that's like building
14 new Chatston shopping centers or 25 Bondi
junctions over the next 10 years. That's a lot
of retail space to build. And then you put that
in an office context, that's like building 40
new 101 Collins Street Towers or 45 Chifley Towers
over the next 10 years. So we think given the
high occupancy of high quality buildings and
the... population growth and the fact that supply
is it's hard to build new stuff we think that
is a good macro environment for you know strong
solid rental growth going forward into the medium
to long term. Yeah it's very interesting what's
happening with the new changes that are coming
in as well regarding bans on You know, the international
capital coming in, you have to be a resident
to purchase. Do you reckon that's going to slow
down money being injected into this space or
everyone's moved their money? They wanted to
move their money before April and then now it's
available, you know, these types of opportunities.
What do you think is happening there? So are
you saying it might? change the sort of population
growth forecast the population growth i was just
talking about capital coming in because there's
two things right there's the population growth
but there's also capital coming in the door to
purchase these purchase these assets so you know
yes you got population but yes you got capital
you're looking for a home which you know historically
some countries your money's not safe. They can
just reach in and take the capital out of your
bank account. But if you look at the laws in
Australia, you know, property is pretty much
like a bank. I hate to say it and look, everyone
knows it, but you drive around Sydney Harbour
at night, you know, and look how many lights
are on in those multi -million dollar, $10, $15
million apartments, right? What you got like,
you know, it's 20 stories high. you got literally
four levels on lights every single year. It's
just essentially people just been land banking
assets. And as you said, there's been some very
interesting changes to policy that's happened
this year regarding foreign investment. I was
just wondering if you think the restrictions
on foreign investment for the next two years
is going to have a major impact on these assets
or has the money already come in and it's not
really a problem? I think my view is that particularly
with what we're seeing in the US and the tariffs,
and there's a lot of global uncertainty, I think
Australia... will continue to be seen as an attractive
place for foreign capital to invest in. We've
got a stable government rule of law and we believe
in a rules -based sort of trading. So I think
the foreign capital is definitely looking, you
know, continues to look at Australia as a good
place to invest, particularly with what's going
on in the US as well. So that's been a discussion
I've had with a number of property groups and
that's what they're seeing. So increasing interest
in Australia as a capital destination. That's
very interesting. It's going to be interesting
to see what's going to happen in the next couple
of years. So with the cutting of the interest
rates, I know we just covered it, with the funds
and your targeted returns, if they do proceed
to cut two more times, what impact will that
have on potential returns for the strategy? So
that cap rate or yield that I talked about of
our indicative portfolio of 5 .7, we believe
that... So reducing interest rate environment
should actually tighten those yields. So those
cap rates, as you know, cap rate or yield is
kind of the inverse of the price earnings multiple.
So as the yield comes down, essentially, it's
like expanding the price earnings multiple. So
essentially, that dollar of income that the property
is producing will be worth more potentially as
the yield sort of tightens. it's a positive factor
going forward. Look, since you've been speaking
to a lot of other groups and a lot of people
looking to invest and a lot of colleagues that
are looking to back you in this new fund of yours,
what's some interesting questions they've hit
you with that I haven't covered? I think probably
there's one question that some people say, well,
it's... our total return is eight to 10%. And
we've got sort of a waterfall diagram of how
we make up that return. And in our, it's not
a forecast, but it sort of works through essentially
that total return of eight to 10. Let's say it's
nine in the middle of that band. We sort of think
over the next few years, we'll deliver around
about a 4 % income return and around 5 % capital
growth. So some people say, well, the income
return is lower than, you know, let's, say a
syndicate, which could be, you know, like an
office building in Canberra that's 50 % geared
or, you know, that's showing a 7 % or 8 % distribution
yield. Well, the key difference is that... because
our fund has higher quality properties with lower
gearing, it will have a lower sort of initial
income return. But we believe that total return
of eight to 10 is a much more attractive risk
adjusted return than essentially buying a single
property, which you've paid stamp duty on, that's
50 % geared. There's much, much less diversification.
So I think people... get their heads around that
about how the return profile differs to a to
a high yielding type property and when they understand
that they sort of realize that our return is
is of a very high quality so that that's one
question that that people ask about probably
Probably the other question is around liquidity.
And as you know, with unlisted property, there's
no silver bullet for liquidity. However, we believe
that the fund, which is monthly unit pricing,
quarterly distributions, And we're basically
saying we believe we can deliver 5 % of NAV per
quarter on a reasonable endeavours basis. And
how we get that is, excuse me, how we arrive
at that is there's a number of what we call layers
of liquidity in this fund. The first layer is
the underlying funds, the institutional funds,
they often have liquidity windows. So some funds
might every sort of five to seven years, they
basically... say to investors do you want to
do you want to stay in the fund or do you want
to roll over because they're open -ended funds
so they might so you know let's say if you're
a let's call it uni super you got 300 million
in one fund you might choose to redeem 50 million
because you want to rebalance to to something
else or you might want to take take more in that
fund so there's these liquidity windows that
are coming up in many of the funds we're targeting
some of them have liquidity every let's call
it you know every every 12 to 18 months you can
get out some of it, or some of them have a limited
sort of quarterly levels of liquidity. So it
just depends on the underlying fund. So that's
layer one of liquidity. The second layer of liquidity
is that these funds have essentially what you
call secondary. So investors can sometimes buy
or sell interest in the funds, even if those
funds aren't raising capital. So again, in that
example, let's say Aussie super has 500 million
in one fund, it might want to rebalance 100 mil
out of that fund into something else. So there's
this process of buying and selling secondaries
that occurs. Then we've got the third layer of
liquidity in our fund, which is a small listed
property portfolio. We're probably going to be
targeting the lower end of 10 to 20 % in selected
REITs. And the REITs will be not necessarily
the property developers or the fund managers
like Goodman Group or Charter Hall, more the
rent collecting REITs, because that's what our
fund is. Essentially, it's a core rent collecting
property product. So we'll be focused on rent
collecting REITs that also complement the portfolio.
So there might be REITs such as childcare or
self -storage or Bunnings warehouses or convenience
retail that kind of balance out our portfolio
and provide more diversification. as well as
a bit of liquidity. And then, of course, once
the fund is up and running, there could be hundreds,
maybe thousands of investors, some investors
coming in on a regular basis, like in a model
portfolio, some investors doing DRPs. So we'll
be able to sort of manage the liquidity through
there. So when you layer up all those levels
of liquidity, we believe that the fund offers
a good level of liquidity for what we're... for
a fund of this star. And that's the way we've
designed it. That makes a lot of sense. So if
we didn't cover it already, Panjan is open for
a raise right now. Do you want to cover exactly
what their offer is? What's the deal? What's
the timeline? What is happening, please? Yeah,
no, thank you. So we're currently raising funds
into our first close as we speak. We think there's
some good opportunities to deploy in the near
term into some of these great funds that we're
talking about. And, you know, I emphasise that,
you know, that the fund is targeting some of
the best quality institutional grade funds at
a very attractive... pricing point in the cycle
with good long -term property fundamentals. in
structures that essentially there's minimal transaction
costs like stamp duty. And there is a potential
to be accessing some of these funds at small
discounts to their book as well. Although personally,
I'd be buying a lot of these funds at book value
at the moment, given their sort of attractive
return outlook. So yes, we're raising to... we're
currently raising to launch the fund or establish
the fund in June, ideally, with deployment in
mid to late June or possibly early July. But
as I said, once the fund is established, then
I believe it can become, it goes into the next
sort of growth stage of the fund where we will
look to list the fund on the big platforms. as
Hub or NetWealth. We'll get it rated with a rating
agency because I've had many discussions from
financial planners who say to me that, you know,
Ryan, this is a wonderful fund for our clients.
It's conservative. It's high quality. It's monthly
unit pricing. It's ongoing. You know, it's a
sort of a perfect model portfolio type fund for
a lot of their clients. They need to get it listed.
And, you know, we think that the scalability
of this fund is significant. you know, the underlying
funds that we're investing in is $60 or $70 billion
of equity. There's plenty of secondaries that
are available, plus some of the funds are raising
equity. So we would hope to grow this fund to
be hundreds of millions and possibly billions
of dollars in size, which I think that scale
will be really great for investors and allow
us to, you know, negotiate great terms with managers
and essentially, you know, continue to deploy
into great opportunities. If any of our listeners
want to learn more about PanGen or yourself or
get in touch with you directly, what's the best
way for them to reach you? Absolutely. The best
place to start is on our website at www .pangen
.com. capital .com. The information memorandum
is there to download. We've got a slide pack.
We've also got webinars that we hold for people
who'd like to get a quick introduction into the
fund. And of course, you can contact us. Our
contact details are on our website as well. So
more than happy to talk to potential investors
or financial advisors or family officers. And
we'd We'd love them to be a part of the fund's
initial opening because I think we're, you know,
I'm really excited about this product. I think
it's offering something genuinely new to the
Australian marketplace. I mean, professionally,
I am, you know, I'm really passionate about this
product. I'm putting, you know, my heart and
soul into this and a lot of my own funds into
this along with my joint venture partners. We
believe in the product. We believe in the timing.
And we think it's going to be a wonderful product
that will produce, you know, good, steady, solid
risk -adjusted returns over the medium to long
term. And, you know, I think it sort of goes
back to my philosophy about long -term investing.
When I was at Unisuper, we were investing people's
life savings. And we are thinking about it from
a long term. And that's why we came up with the
name PanGen Capital, which essentially means
PanGeneration Capital. We would love our investors
to be investing with us over the long term for
their lifetime and perhaps pass on their investment
to the next generation. So that's really our
philosophy. Ryan, thank you very much for coming
on the podcast, The Rate of Change with York
Wealth Management. Really appreciate your insights
today and I love what you're doing about helping
people provide access to institutional grade
opportunities like this. So thank you very much
for coming on and I hope you have a great day.
Okay, you too. Thanks. Bye. Any use of this recording
does not represent the view of any other third
party and are the sole personal opinions of the
speaker. Any reference to financial products
does not constitute advice or recommendation
and before any action you should seek proper
advice from your financial professional. Australian
listeners should head to www .moneysmart .gov
.au to find more information on obtaining financial
advice. To get in touch with York, head to our
website www .yorkwealth .com dot com dot au