Managing Director of Ready Media Group, Rob Langton, recently sat down with AsheMorgan's Head of Investor Relations / Joint Ventures, Michael Rothner. As Principal for one of Australia's most recognisable property investment houses, he had much to say during this 20-minute conversation. Here are some of the highlights from Rothner's discussion with Mr. Langton.
Prior to the GFC, AsheMorgan was the largest commercial origination business in Australia
AsheMorgan was established by Michael Moss in the early 1980s, and its initial offering involved providing specialist expertise in mortgage origination and management. Michael joined the team in 1990.
“We used to arrange funding either through the banks or for people who couldn’t get money through the banks, with lawyers, funds and trusts.”
At a time where the major institutions had an effective monopoly on the mortgage lending space, AsheMorgan was beginning to redefine the options for customers.
“We were sort of at the forefront of non-bank lending.”
With the non-institutional lending space such an influential sector in today’s property landscape, it’s worth appreciating that AsheMorgan were one of the early groups that paved the way for this burgeoning industry to take up a notable share of the lending market.
Interior of No1 ANZAC Square - One of AsheMorgan's preeminent office assets
“We were originating in excess of $3.5 billion a year, which even today is a big number. That was our business back then.”
In many ways, AsheMorgan’s early efforts were instrumental in enabling an embryonic idea to gain acceptance within the property and finance industries.
“We were the conduit to people accessing funds, both through the major banks and through the non-banking sector.”
AsheMorgan’s pivot to private property investment
Rothner highlights the years immediately subsequent to the GFC as the years that AsheMorgan shifted their business practice from origination services to a “private equity real estate model”, which is what they are best known for nowadays.
“When we started, we were dealing with onshore, local high net-worth investors... assets that were generally up to that $75-$100 million mark.”
“Across the board, we were investing in office, retail, residential, etc. We’ve sort of changed that now as the business has grown. We’ve started to tap into a lot of offshore capital.”
In the competitive world of offshore capital, Michael stresses that opportunities arise based on “track record”. He maintains that AsheMorgan’s consistency has created a reputation that keeps overseas investors dialed into their projects, even as more and more groups jockey for the attention of this capital.
“Once you start to build a track record and you’re bringing in capital and people can see that you’re performing, people want to get on the bandwagon.”
The District, Docklands – repositioning 82,500 sqm in Net Lettable Area (NLA)
“When we bought that, it was a bit of a white elephant... It's taken us quite a while to reposition that asset.”
The District in Melbourne’s Docklands is AsheMorgan's long-haul redevelopment of a well-renown landholding, and is starting to generate some significant noise thanks to its rejuvenation of what was previously considered a misfiring.
The District, Docklands - AsheMorgan's 10-hectare redevelopment of a once-forgotten precinct
The group acquired the 10-hectare precinct from ING for $150 million in 2014, and since then, they have transformed what was a predominantly retail-centric commercial landholding into a diversified establishment that contains over 82,000 sqm in NLA. According to the project's landing page, the NLA is expected to grow to beyond 140,000 sqm by 2027.
“It was sort of an unsuccessful Discount Factory Outlet; we’ve pivoted towards mixed-use. We’ve built an entertainment precinct. We’ve built a fresh food precinct. We’re pivoting the upstairs [areas] towards more commercial. It’s a real mixed-use asset.”
AsheMorgan's estimate of The District's NLA to 2027
But the development isn’t just going to be limited to commercial applications – AsheMorgan are looking to construct Build-To-Rent and Build-To-Sell units, to incorporate a residential component into the project.
“We just got approval to do 160,000 sqm of mixed-use. There’ll be quite a bit of BTR and BTS.”
For an area that had fallen into infamy, it has taken an incredibly ambitious, concerted effort to transform The District into what it is today.
Where the property sector is headed
Many are bracing for turbulence, and it’s not surprising; the RBA’s hiking of the cash rate has led to an uncertain economic landscape. But Michael believes that some people’s expectations should be slightly more temperate.
“My view is that things are not going to be as bad as what people expect.”
That said, Rothner admits that a disruption is inevitable, but that it will be less severe than some experts are anticipating.
“I mean, you’ve seen interest rates come up 2 per cent in the last six months – that hasn’t really filtered through yet. Surely that’s going to have an effect on cap rates... but I do think there will be opportunities. But I don’t think that there’s going to be any bloodbath coming in the next 6-to-12 months.”
Watch the full interview with Michael Rothner, conducted by Rob Langton, here.
