Ideas for successful investing in commercial real estate

Our next investor is Rob Rayner from RFKovo.

Rob Rayner is a co-founder and CEO of RFKovo.

The RFKovo business was founded in 2009 as a specialist Australian real estate investor with

the simple aim of delivering strong investor returns with a personalized approach.

The I have COVID Property Fund aims to preserve and grow the wealth of private investors and their families by investing judiciously in unlisted Australian real estate.

Rob is gonna talk about the ideas for successful investing in commercial real estate.

Welcome, Rob.

Thank you, and good morning.

Thank you for those kind introductory words.

My name is Rob Raynor.

I'm the CEO and also a major shareholder in the RF Corvall business.

And as you just heard, our business is very much focused on unlisted real estate.

Our business started in 2009 and the major shareholders in the business, along with myself, is a fellow called Andrew Roberts.

Andrew is the eldest son of John Roberts.

They were the founders of the multiplex instructions business.

So the real estate DNA in RF Corvall is deep and it's strong.

Having started our business in 2009, Andrew and I and the rest of the team really had no clear agenda as to how big the size of the business we wanted to be, but we were certainly very clear on many other important aspects, particularly wanting to protect capital.

As you just heard, we haven't lost any money for an investment.

Certainly that's the clean sheet that we want to keep.

We very much wanted to generate solid and reliable income returns for investors, both income and capital growth.

And as you just heard,

deliver 28% returns across everything we've done.

And I should point out that 20% is a weighted average return.

It's not the best return, it's a selection of everything or it's an average of everything.

Some are higher than that, some are slightly lower than that, but it weights average return to 28%, which we're obviously very proud of.

And that sort of equally flows into a weighted average equity multiple of two odd times.

And for context, since we started the business, we bought and sold

somewhere between two and a half to $3 billion worth of real estate.

Some 70 or so assets were bought, some 30 or so assets were sold, and we currently managed about 40 assets across $1.5 billion worth of real estate.

The other thing we want to be very, very clear on, we only wanted to employ the very best people in our team.

I know we've done that.

We've had enormous stability in the team over 13 odd years.

We've only had one person leave our firm, and that person's gone on to do a role with

offshore transactions, which at that point we weren't doing anything offshore.

So our focus in the main has been very much Australian real estate in the office and industrial space.

We've done a lot in the agricultural space and the sale and lease banks.

We've done something in the hotel space.

We've also done some stuff in the land lease community space.

So what drives me each day as we come to work each day to look and hunt for value for investors.

We're not clever enough or smart enough to say, look, we don't want to be on the

George Street and the Sydney CBD, or we only want to be in Walshville in Perth, we don't do that.

We very much look for opportunities where we can find value and then drive those returns for our investors.

And from that, we look to build very strong partnerships with both our investors and our tenants.

And then having found real estate, our focus is to buy the assets as cheap as we can, manage those assets very aggressively, then look to sell the assets at the right point in time and lock in and deliver returns for our investors.

The next slide shows briefly our track record, which talks to it.

As you can see, it's about $2.5 billion worth of assets we bought.

The assets both what we own today and what we've sold is nearly $4 billion.

The IRAs you can see there across industrial office and others is about 20.

And you can see the multiples there.

So that slide is relatively self-explanatory and I don't think I need to talk too much more to it.

The next slide is we've included because it probably goes to a bit more about myself and our firm.

I've been in real estate now for 35 odd years and this chart here shows the power of what we think of the benefits of unlisted real estate.

Quickly what this slide is showing is the blue bars show income and the green bars show capital movements and the purple line that snakes its way through is really the combination of both the income and capital and

What's clear and apparent to that, to me at least, is that, yes, there's been some down periods of time with commercial real estate or unlisted real estate rather has had negative returns, but by and far it's been relatively few and far between.

Back in 1990, I started my real estate career back in 1990, coincidentally interest rates were then back at about 25% and it really was a difficult time.

to punch into the breeze with higher interest rates.

So we saw a downturn in unlisted real estate there.

2008 and 2009, everyone remembers that was the GFC, and then more recently we've had some corrections on account of COVID.

But all through that period of time, even through the GFC, even through 1990, income was always paid, and it's been a relatively stable return in unlisted real estate.

If I then compare that to the listed markets,

which obviously behave, we feel, more like an equity as opposed to a direct real estate investment.

There's been a lot more volatility.

We haven't shown that on this slide because we didn't want to confuse the slide too much.

But what I can say is, over the last 20 or so years, there's been about six of those years we've had negative returns or downturns or drawdowns, as they call it, in the listed space.

And clearly REITs or List A REITs are far more correlated with the returns to

to both equities and bonds where direct real estate is less so.

They don't have anywhere near the volatility or the gyration.

So we feel, and certainly a lot of the larger investors, family offices, wealth firms, et cetera, have got a legitimate space for direct real estate in their portfolios to provide that direct return, as I say, to real estate, less so around equities and bonds.

So the obvious question for us is then how do you access

direct real estate, and clearly we can provide those opportunities to our investors.

And that then sort of leads us into the RF Corbell Property Fund, which we launched only last year.

It's an unlisted fund, an open-ended fund that's available on a range of platforms.

It's clearly designed to preserve and grow wealth for investors.

It does have a number of interesting and attractive features.

There's monthly redemptions, there's daily unit pricing,

It has a look through exposure to 21 or so assets.

I'm going to say look through.

This fund now has two direct assets in it.

But interestingly, it also has exposure to quite a number of our unlisted syndicates, which we've done over the journey.

And our syndicates for those that are familiar with what they are, that's a closed-ended vehicle.

We go and buy an asset, put it into a syndicate.

Investors then get that return that's directly linked to that asset or assets in that syndicate.

They have a fixed term of five to seven years and then investors then have a liquidity event at the end.

So what we've then arranged to do with this fund is it's seeded with a whole range of various syndicate assets.

So investors have got a nice spread of assets across commercial real estate, industrial, different states and different tenants.

But with the added benefits of liquidity, daily unit pricing,

and the diversification that comes from that.

In terms of the returns that the fund is looking to target, it has been, and I'll talk to the returns board in a moment, around about a 5% income return, and we are targeting a total return of 10%.

Moving forward, we will be looking to put more direct real estate into the fund, and of course, get access to our various syndicates.

And the syndicates, when we do launch them, which have been in the past available for wholesale investors only,

but I know I am talking to an audience of wholesale investors, but the issue with the syndicates is they tend to open and close very, very quickly.

You don't have that complication or issue with this fund here in the sense the fund has got exposure to syndicates.

It will continue to get a preferred 20% or so, 25% exposure to our syndicates if it chooses to invest, and therefore you've got the comfort and peace of mind that you've got your money working from day one in a diversified pool of assets with a solid return

a solid manager and will continue to get the exposure to syndicates and direct real estate moving forward.

The other aspect that I should touch on quickly is clearly the market out there with higher interest rates and inflation is putting some pressure on asset values.

We've recently refreshed all of our valuations in our assets.

We'll do that again in 30 June, but that in itself presents the enormous opportunity that we feel to get capital to work moving forward.

in this fund in the sense that as and when funds progressively come in and we've got really solid support from a range of advisors and different platforms, et cetera, not existing all solid investors, we feel like we're now buying into a much better market with assets that would have a more good price somewhat.

As a business, RF Core has been actually quite quiet over the last two or three years.

We've been selling as much as we've bought.

We're not clever enough or smart enough to say we saw the rates were going to go from here to here.

We just felt for some time that values were on the toppy type side, so we've selectively looked to offload some assets in our syndicates, but this fund is now the primary beneficiary.

It can and will buy into a much better market.

So with the fund that we've got and the team that we have, I'm very, very excited with where this fund can and will go, and it will be the flagship fund for our business moving forward.

The final slide really just gives you a quick snapshot of our returns.

You can sort of see the fund was incepted in February of last year, which is now a little bit more than 12 months ago.

The dark grey green boxes is the valuations of June, which was an uptick in June of last year.

And the fund returns since inception has been about 10.85 or some 10 to 11.

And there's the various research reports that are available for the fund as well.

So conscious of time, I'd like to thank everyone for their time.

My contact, our contact details are on the screen there.

So please reach out either by email or if you're in Sydney, come by and see us or reach out for fire.

We'd be happy to answer any questions you've got.

But again, thank you for your time this morning.

Thank you, Rob.