ResiFund gives investors the opportunity to invest across a range of residential assets.
OpenCorp Founder and Director Matthew Lewison talks to Finance News Network about the company’s new residential property fund, ResiFund, where it invests, its aims and how it hopes to deliver a better outcome for property investors.
Rachael Jones: Hello. I’m Rachael Jones for the Finance News Network. Joining me today from OpenCorp is Founder and Director Matt Lewison. Matt, welcome to FNN.
Matt Lewison: Thanks Rachael.
Rachael Jones: Now, OpenCorp has recently launched a residential real estate fund. Why now?
Matt Lewison: Well, as you know, residential property has been a great-performing asset class in Australia for at least 30 years, but obviously much longer, but it hasn’t quite had the yields that some of the other asset classes have had. And obviously a lot of investors, particularly yield-focused investors, have concentrated on commercial assets and industrial portfolios of retail. These days, because of the low-interest rate environment, which has changed the asset values, residential property is now yielding around the same as some of those other asset classes, and in many areas around the world, it’s actually perceived to be a lower risk investment in terms of the income sustainability. So it’s made it much more attractive to enter that residential market with a portfolio than it was in the past.
Rachael Jones: Thanks Matt. Now let’s talk about the fund. What can you tell me about the key features?
Matt Lewison: So the fund is a diversified property residential fund. So it gives investors the opportunity to invest across a range of residential assets that are yield-focused assets. So we’re deriving yields in excess of 5%, so our target is to achieve a net 5% per annum return on income plus capital growth, achieving a total return of at least 10% per annum. So far this year, we’re already on track. We’ve exceeded 5% since March when we launched, and we’re on track to exceed our 10% target this year. And we also diversify across geographic areas. So we’re able to invest across different cities around Australia, which most investors don’t really have the opportunity to do unless they are very sophisticated and long-established investors. So it really allows people to springboard all of those steps and invest in a well-managed professional portfolio from day one.
Rachael Jones: And what are the risks?
Matt Lewison: I guess one of the advantages that we have with ResiFund is that it’s diversified, so you don’t have concentration risk. And that’s one of the important factors because over 180,000 self-managed super funds in Australia right now have at least 90% of their balance invested in just a single asset, and the ATO recently wrote to 17,000 of those, advising that the concentration risk was something they needed to address considering they also had taken on debt within their self-managed super fund. And that’s one of the benefits of diversifying. We get to tap into lots of different tenant pools and geographic areas.
There’s been similar funds that have raised money in Australia operated within the US, for instance, and they’ve had a little bit of a challenge with the oversight. So, we’re local, we’re investing locally with a local team. We have a compliance team here and an independent investment committee, and we’re audited here as well. So, some of those, I guess, risks of investing in similar types of funds that operate overseas are not there with ResiFund.
And one more thing is that we also co-invest directly alongside our investors within the fund. And at the moment we’re actually the largest investor in the fund, so we’re heavily focused on ensuring that the fund delivers great outcomes for our investors.
Rachael Jones: And Matt, you’ve been involved in residential property funds for a number of years now. How, as a manager, do you navigate the highs and lows of the property cycle and avoid the pitfalls that send some investors broke?
Matt Lewison: Yeah. Well, I’ve been investing personally for 21 years, and my brother and I were taught by our father, who had been investing for 15 years before that. And we got to witness his investment journey firsthand. Since we started, we’ve invested in just about every type of residential property, and we’ve seen what works and what doesn’t work. We take the approach of looking at market, then area, then property, and we also have an independent investment committee. So we’re regularly meeting, talking about which markets we want to invest in, making sure that we’re weighting our portfolio appropriately, and also making sure that we’re investing in areas with the right sort of amenity that have demand for tenants and that’s going to ensure that we have good rental income coming through when we are leasing out our properties. And also having the best opportunity for capital growth.
We’ve obviously tried to attract the best people available for that investment committee. We’ve got the President of the Urban Development Institute of Australia as well as a professional from the real estate industry who’s been doing residential property portfolios for about 15 years in America, one of the very few professionals in Australia who’s been doing this sort of thing internationally.
Rachael Jones: Thanks Matt, and to the last question now, where would you like to see the ResiFund a year from now?
Matt Lewison: We obviously want to continue to diversify the fund. We’d like to have assets in every capital city around Australia within a year, and we’d like to have at least 100 tenants across our property portfolio within that timeframe as well. Obviously, the broader the tenant base, the better the income sustainability is. And if we look at Harry Triguboff, who’s obviously very well known in Australia as one of the most successful property investors, he’s got a very broad and diverse income stream coming from thousands of tenants. And when he went through the GFC, like all of us, he came out the other side in a much better position because he had that maintained income that didn’t drop off. So, we see that the broader the income base of the fund, the lower risk it will be, and the better able to grow and capture future opportunities for our investors.
Rachael Jones: Matt Lewison, thanks so much for the introduction.
Matt Lewison: No, thank you for your time.