07 Sep 2023
Key Topics
In this episode, How megatrends are shaping the property and healthcare sectors, LGT Crestone’s Chief Investment Officer, Scott Haslem, interviews David Di Pilla, Founder and Group CEO of HMC Capital. David explores what the future has in store for commercial property, how valuations are currently looking, and how megatrends are shaping the residential and commercial property sectors.
- Opportunities are unfolding in the commercial property space, where investors can take advantage of income and steady growing distributions that are uncorrelated to broader markets. HMC Capital sees structural headwinds developing in the office sector and is avoiding this space.
- Healthcare is a sector where underlying demand drivers are compelling, given a growing and ageing population, and medical advancements with more intervention medicine. The style of leases in the healthcare sector is rare, where all outgoings are paid for by the tenant, and the sector has a robust counterparty with a lot of government revenue.
- Given the rise in interest rates, real estate investment trusts (REITs) have sold off and are now trading below net tangible assets. As we approach the peak in the rate cycle in coming months, investors should consider looking at assets with strong underlying fundamentals, which are likely to see a recovery in prices as conditions improve. REITs now have hard guard rails around their gearing levels, so it is unlikely that a GFC-type event will occur where liquidity dries out.
- The underlying demand drivers for residential property in Sydney and Melbourne are compelling. With immigration set to increase, this is driving up demand for property. Investors can gain exposure to this thematic via build-to-rent and the manufactured housing sectors, as well as social and affordable housing.
- The energy transition is driving more capital into this space. The sheer need the economy has to meet net-zero targets will create a compelling opportunity for sustainable assets.
- Opportunities are unfolding in the commercial property space, where investors can take advantage of income and steady growing distributions that are uncorrelated to broader markets. HMC Capital sees structural headwinds developing in the office sector and is avoiding this space.
- Healthcare is a sector where underlying demand drivers are compelling, given a growing and ageing population, and medical advancements with more intervention medicine. The style of leases in the healthcare sector is rare, where all outgoings are paid for by the tenant, and the sector has a robust counterparty with a lot of government revenue.
- Given the rise in interest rates, real estate investment trusts (REITs) have sold off and are now trading below net tangible assets. As we approach the peak in the rate cycle in coming months, investors should consider looking at assets with strong underlying fundamentals, which are likely to see a recovery in prices as conditions improve. REITs now have hard guard rails around their gearing levels, so it is unlikely that a GFC-type event will occur where liquidity dries out.
- The underlying demand drivers for residential property in Sydney and Melbourne are compelling. With immigration set to increase, this is driving up demand for property. Investors can gain exposure to this thematic via build-to-rent and the manufactured housing sectors, as well as social and affordable housing.
- The energy transition is driving more capital into this space. The sheer need the economy has to meet net-zero targets will create a compelling opportunity for sustainable assets.
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