Arcana Capital - Your Commercial Property Partners, Tailored High-Yielding Portfolios

Coming next, we have Kobe Phillips from Arcana Capital.

Kobe is the manager of investor relations of Arcana Capital.

Arcana Capital provides the structure, compliance, and opportunities for wholesale investors and trustees to build your own high-yielding commercial property portfolio with direct ownership of the property assets.

as opposed to a general pooled trust and with monthly distributions averaging 8.3% per annum, plus potential for capital growth and tax effectiveness.

Colby is going to talk about how Arcana Capital can be your commercial property partners.

Over to you, Colby.

Thanks, Angelina.

And thanks very much, Michael, for that really informative presentation.

Very, very good stuff to know, particularly

I suppose, in the uncertain environment that we find ourselves in.

So, yeah, thanks for the floor.

As Angelina said, my name's Colby, so I work for Arcana Capital in the investor relations side of things.

Now, Arcana Capital established in 2015, we're sort of a boutique unlisted property fund manager.

And we really just try to look for value for wholesale investors, I suppose, in a couple of different ways compared to certain larger competitors, et cetera.

So I suppose I'll talk about how we are looking to navigate through the current uncertainty in the market, particularly with regards to property specifically.

And I suppose look to find value moving forward.

So our main proposition

is that we're looking to provide structure compliance and opportunities for wholesale investors to build your own high yielding commercial property.

Now, what do I mean by that?

I suppose I like to think of property ownership, you know, particularly from an investment standpoint on a kind of spectrum.

So you sort of have one end of the spectrum where you have higher liquidity, you know, possibly lower returns, increased diversification,

and less control over what you're going into.

So good examples of stuff on that end of the spectrum might be the ASX listed REITs where retail investors, et cetera, can go into those and effectively buy shares in those funds and collect their return.

But due to the fact that they're open-ended funds and quite large, it's very much a model of tipping properties in and out

a regular basis just to keep things moving and I suppose the other end of the spectrum compared to that might be ownership in its entirety of a commercial property.

Now that's obviously complete control, it's a lot of hassle to manage and own property and it also reduces the opportunity for diversification purely due to the fact that you've

deploying a fair chunk of your own capital, possibly all of your own capital into say one or few properties.

So where we come in as, as I suppose, a bit of a boutique manager is that we try to come in somewhere in the middle between those two ends of the spectrum.

So hence the structure compliance opportunities is that we want to provide opportunities to invest in a various different property at any given time and

manage those properties moving forwards, do it in a compliant manner.

We are an AFSL holder, so we do have regulations placed upon us from multiple directions.

So that sort of takes the hassle out of owning property, but still the opportunity to kind of spread risk, but also be specific over what people are looking to get into.

For example, on this next slide, I've got a couple of different examples of recent opportunities that we've done where

Say someone might look at that fuel station over in Wynnum in Brisbane and we presented that opportunity and they might think, you know what, I've already got a lot of exposure to fuel or maybe I just have too much exposure to the Brisbane property market, et cetera.

So I'm going to sit this one out and wait for the next one, which might've been say this industrial shed in Kalgoorlie at which point some people might think,

Great, I've got zero exposure to property in WA, let alone industrial property in WA.

It's a great building with a long whale, got all the information, you know what, I'm going to invest in this one.

And that's what we mean by being able to create your own diversified portfolio, because it's really picking and choosing what types of things that you come into.

And what we see is that

particularly in the current uncertain times, a lot of investors are keeping their powder dry for lack of a better term.

So they might be sort of hanging on to capital undeployed and just sort of waiting to see where things settle.

And they don't just want to trust it in certain generalised offerings out there.

So we've found that people are certainly more inclined to be more specific with what they put their money into.

So as far as our history goes, we typically do single asset closed-ended trusts, sometimes multi-asset, but always closed-ended at the moment.

So we issue IEMs based on the exact properties that we're purchasing and investors make decisions based on that.

So rest assured, we're not opening up our funds just to tip properties in and out of indiscriminately.

There's a lot of control and transparency there.

a variety of asset classes based on the sentiment of our current investor base and I suppose conversations with potential investors as well.

For example, for the time being, we're probably likely to avoid certain fuel type assets just given the current public sentiment around certain things.

But that also depends.

The right thing might pop up in the right location, which is very convincing and we think will deliver a strong

but possibly, perceivably safer return to investors.

So we do look at things in a case by case basis.

Our current trusts are returning between six and 15% per annum.

And I suppose their current target for new opportunities is a 7% distribution per annum.

And that's not a target IRR, that's just a yearly projection of distribution.

We don't project capital gains because you never know what the market's going to do.

So this is net of fees, net of expenses and net of any potential capital gain upon divestment.

So performance to date, we've acquired over $212 million in property since we started.

And as of right now, we have about $110 million in investor equity under management.

Now, the weighted average distribution across all of our trusts currently is about 8.3%.

So assuming someone were to have put $100,000 in every single one of those trusts, then they'd be getting an average return of 8.3% across them all.

And that's equivalent to about 9.3 million total payout to investors in distributions.

Now this one's a bit of a mission this slide, but effectively we're just detailing the process when it comes to the services that we're providing and then the commitment of investors.

So we're constantly doing market analysis, we're assessing opportunities, we're doing detailed evaluation of opportunities and sort of writing them against a strict criteria.

And then if it works for us, then we'll,

put in office to purchase the opportunities and secure them, at which point we start preparing full due diligence and all of the required documentation to issue to potential investors to make a decision, at which point, once the finance has been raised and once the due diligence is complete and it's all settled, then we provide ongoing management and any value add where we can, typically for a period of around five years.

But that's not a set time.

because we understand that a lot of things can happen in the property cycle.

So we don't try and restrict, I guess, the timeframes.

So for example, this is our last opportunity, which we actually just completed.

So that was a $25.5 million purchase.

It's forecast returns for years one and two are seven and one quarter percent.

It's two fully leased office buildings, one in Brisbane, one in Perth, wrapped up in the one trust.

with a four-year well.

We love this one for our investors because it was a unique opportunity to get some geographic diversity with the two different office locations, WA Queensland, but also tenant diversity where we have 15 tenants across both properties.

and releases to government tenants and multinational companies and other local professional firms.

So that one was very popular with investors and constituted a fifteen point eight million dollar capital raise.

So that one was very exciting.

And I suppose that's one type of asset.

And to highlight the different types of offerings that we have got another case study being the ADNCF Logistics Unit Trust.

Now, that was the one that we did just prior.

back end of last year.

So that was a fair bit smaller, $6.6 million purchase.

It's currently paying 10% per annum distributions, and that's the forecast for years one and two.

It's at a 40% LVR.

Given that it's slightly more regional, we just want to reduce gearing on that one.

But we bought it well at 11% yield.

We sort of engineered the deal to work for us, our investors, and ultimately sealed the deal, and they're currently managing it now.

So, you know, given the uncertain times, we do see that a lot of people, I suppose, might be going for different risk profiles in their opportunities.

Sometimes slightly riskier, sometimes less.

So here's the leadership of Arcana.

It might be a familiar face right there in the middle.

That's our Managing Director, Campbell Newman.

So he set up Arcana Capital with the late Don Condon in 2015.

and has been doing this ever since.

Peter Eccleston directs investor relations and sort of manages some properties.

And then Christina Condon is our CFO and she's got decades of experience as a CFO for large property funds.

So throughout our leadership, we've got some great experience across the board, and that really helps us not only secure a good pipeline of deals,

but also gives us a good insight into the analysis of our pipeline as well.

So they're very blessed to have them.

And I suppose that's really what we're about.

And in the current market, it can be harder to find value.

As we've seen, interest rates aren't the only factor in what happens to commercial property yields.

And I suppose certain people might've expected yields to soften a little bit more over the last six months.

It can be hard to find value, particularly in the capital cities.

So as a result, we tend to have a bit more of a regional focus.

We try to engineer some deals to be worth our while.

And I suppose, rest assured, we're always looking for the right thing for our investors.

The directors always invest, so there's skin in the game.

And I suppose that's incentive to really manage things appropriately and do the right thing by investors.

As you can see on this slide, you can contact us on our website, which is ArcanaCapital.com.

You can find us on LinkedIn.

Otherwise, please feel free to shoot me an email at Colby at ArcanaCapital.com if you have any questions.

But yeah, otherwise, thank you so much for your time.

I hope you enjoy the rest of the seminar and thanks very much to Investment Markets for having me.

Thank you, Colby.

Ladies and gentlemen, that's Colby Phyllis from Arcana Capital.