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Strategies.
PIMG has achieved consistently stable, high yield dividend returns through real estate asset management. This is obtained through identifying projects that provide consistent, inflation hedged cash flows with strong uplift potential through operations improvement.
PIMG’s team has successfully managed a portfolio of assets achieving a 20%+ per annum average return for family office client via identifying a hidden asset class of property management assets in Australia. We negotiated attractive investment entry levels to assets with at least a 20 year+ guarantee of inflation hedged (CPI linked) monthly income, with contract extension opportunities ( max of 25 years). The portfolio covers residential, short-term accommodation projects, townhouse estates and heritage buildings.
The current macro-economic potential of possible recession, sticky inflation and rising interest rates has led to fluctuations in cap rates and price discovery. Interestingly this negative affect on valuations is coupled with a i) return to business as usual, ii) domestic travel and international travel return to normalcy, iii) sky rocketing rents and iv) ADR/RevPar at historic highs (above 2019 peak). Given such a mix of factors and our extensive network, we are increasingly finding highly favourable opportunities in the hotel, resort, student accommodation, Multi-Family sector as well as private credit collateralized with such assets. As such, our current target acquisitions are:
Hotel/Resort/FH/VP/LH
(Value Add)
- PIMG targets to acquire quality freehold / leasehold hotel assets to offer greater likelihood of uplift, yield growth and diversification opportunities.
- Our analysis suggests the opportunity exists for yields of 15%-25% returns for prized assets undergoing the distress of doubling and tripling of interest rates and an onslaught of fixed to variable deadlines.
- We target strategic locations with uplift potential and value add such as Brisbane, North Queensland, Adelaide and Hobart. These areas offer higher cap opportunities versus Melbourne and Sydney and have low to low-moderate supply of competition incoming in 2023-2026.
- PIMG’s operations team has multi-decades of short-term accommodation / hotel operations experience to improve on efficiencies / margins. Value-add on rebranding, positioning and refurbishing. Optimize food & beverage, events and repeat business and leisure rolodex of clientele.
- PIMG has secured MOUs with world class hotel operators and can leverage their brand name / revenue management / booking / sales and marketing systems to ensure the stability of returns and mitigate operational risks.
Hotel/Commercial/Industrial FH Acquisition with Long Lease
(Core)
- Aligning with Australia’s Government Thrive 2030 initiative, PIMG targets to acquire quality freehold hotel / commercial / industrial assets in growth locations protected with long leases and inflation hedges.
- Acquisition of assets with at least 15 years long lease with cap rates above 8%.
- Acquire with no leverage, initial 8% return, gradual yield growth and refinance when borrowing cost subsides.
- Exit with substantial uplift with the advantage of embedded rental revenues growth (CPI annual increase leases), borrowing cost lowers and cap rates compress.
- PIMG already has working relationships with regional banks such as Suncorp, Bank of Queensland, Commonwealth Bank as well as leading specialist lenders in real estate private credit to secure the lowest cost of capital when the opportunity arises.
Student Accommodation / Retirement Housing
(Core Plus)
- PIMG’s target scope includes acquisition of the freehold, leasehold or management rights of student apartment buildings and student village complexes. PIMG also sees potential upcoming opportunities to optimize yield with retirement housing / assisted living / memory care / nursing care assets.
- PIMG’s current advisor has owned and operated major student accommodation projects successfully in Brisbane and Gold Coast regions covering students from UQ, QUT, Bond University, Griffith University and other TAFE, continued education establishments. Our team members have had experience in operating student accommodation management rights assets. Student Accommodation type management rights also have no exposure to risk of loss of lease due to return of owner occupier from student accommodation (legislation does not allow non-student owner to live in entities deemed student accommodation).
- China’s major ban of the recognition of online degrees has forced an explosion of overseas student returns / new arrivals in Australia, creating a demand gap for student housing and accommodation in strategic cities and locations close to popular universities. Student accommodation rents are currently 10% up on pre-pandemic levels, with the return of international students at 521,000 in 2022, the peak of which was in 2019, at 757,900 (property council of Australia, Student Accommodation Council). PBSA (purpose built student accommodation) currently totals 76,540 beds and is estimated to grow to 93,300 by 2025, with 26% domestic use by Australian students, and 27% by China.
- Size of the Australia Senior Living market is USD 5.15B and is anticipated to grow at a CAGR of 8.17% during 2023-2028. The demand for senior housing has increased in Australia due to the COVID-19 pandemic and is expected to continue to rise in the coming years, driven by a focus on health and well-being and a rapidly ageing population. Around a quarter of Australians will be 65 years or older by 2050. By 2025, the number of people aged 65 and above will have surpassed the number of children aged 0 to 14. The number of Australians aged 85 and over is expected to rise from 540,000 in 2020 to 1.57 million by 2050, with 25% of those in accommodation care.
Multi-Family Residential / Management Rights*
(Core)
- PIMG is engaged in the acquisition of stable, high yielding Multi-Family assets in high growth regions with comparatively higher margins of safety. Australia's rental vacancy rate dropped to 1.3 per cent in Jan ’23, down significantly from 2% Jan22 (CoreLogic). Residential rents have surged by a record high of 10.2% Australia wide in 2022, currently at AUD $555 per week. Corelogic report expects Brisbane, Perth and Adelaide vacancy rates approaching zero in 2023.
- Similar in operation, but higher in yield is the acquisition of property management businesses of residential Multi-Family apartment buildings, townhouse complexes, village complexes and heritage buildings rebuilt for residential purposes. These assets are called management rights assets in Australia which is the acquisition of the property management businesses of such assets without acquiring the underlying assets outright. The bulk of income stream of these assets is derived from stable, inflation hedged property management fees (the majority of body corporate levies), paid monthly. The cash flows are guaranteed by legal protections of 20 years+, with the opportunity to top up to 25 years (the maximum) if the property manager has a good working relationship with the committee of owners and body corporate.
- The key to Multifamily assets is superior property management, tenant management, vacancy management and arrears management experience. This is the core of PIMG’s team expertise.
*Management Rights grant the buyer/investor the right to provide management and leasing services to entities within a Community Titles Scheme, whether it be a set of townhouses, a shopping centre, a building apartment, a retirement village, a resort or a student accommodation complex. In Queensland, Management Rights fall under the BCCM Act (The Body Corporate and Community Management Act 1997). Given that the service provider performs their contractual obligations as agreed in the scheduled set under the caretaking and letting agreements on purchase, Queensland legislation protects the investor of these rights with a guaranteed income stream (which is the body corporate monthly salary, or in overseas terms, the building management fee) within a set term agreed within the contractual agreement between buyer and seller (usually a fresh term is 25 years).