We were just interviewed by Mandi Prager of MP Property Group to talk about off shore property buyers, buyers agency, what's trending and why engage a buyers agent for property advice, assessment, negotiation and execution?
Visit the MP Report click here
Boutique buyers agency firm Rose & Jones, based in Double Bay, deals predominately with high net worth's looking to expand their residential property portfolio as well as offshore groups looking to enter the Australian residential or commercial property market. With over 50 years of expertise and an impressive private client base, Stuart Jones talks purchasing trends and why of late off shore individuals are so keen to call Australia home.
MP: Can you give us an example of some of the transactions Rose & Jones have completed for clients his year?
Stuart: We are very fortunate to work for great clients who value what we do and bring to the property transaction, they prize our service and advice. A couple of examples of good deals we have done this year included the purchase of an office building for one of our South African clients (we now manage over $40 million worth of assets for them) for around $19 million in the western corridor of Sydney’s CBD. We did this transaction off market, fully tenanted with a net yield of 7.4% (and in case you were wondering, it was under rented with a good expiry mix, enabling us to improve the returns through negotiations and in time ne tenants). Our client was looking for good passing income on an asset that presented good upside via the tenancy and reversion of the asset over the medium term as well, and they sought our advice on the locations and why. We ended up focusing on the western corridor for a number of reasons, some which included it offers great value, its under developed, is an emerging market but buyers need to be discerning – a great reason to come and talk to us. Our client is really happy which we are delighted about, we are also managing the asset, it suits our client to work with us because we understand the strategy, we worked with them to devise it so it makes sense for them to have us roll it out – an end to end solution!
It’s not just the commercial piece, we purchase between $60 and $100 million worth of residential property annually, from $15 million plus homes to $600,000 investments. We bought a great semi in Bronte for a couple of New York based expats. The property was purchased for $1.58 million, it had sold for $1.72 million in 2009, it is fully renovated and we have been able to lease it on a 5% yield. Our client is happy, they have secured their first home for when they return in about 3-5 years, they are getting a over 4% net in income + capital growth (they will get total returns of 9% pa + on the conservative side) and they purchased below replacement cost which is a great outcome for them – valuer was happy too.
Another good buy was a 2 bedroom unit in Stanmore, in a small block of 12, north facing with off street parking and over 120m2 on title + parking. Our client is getting a 6% yield + Growth, it was bought at auction – with quite a bit of competition but our strategy worked, we secured the property below what we were prepared to buy it for, our DD showed it working as an investment, purchased on a 5.2% yield minimum, given the current return our “assessment” was vindicated.
MP: Why is Australian property so popular offshore?
Stuart: Firstly, Australia offers security for investors – politically, economically and financially, I think this is attractive to investors. These reasons have gained even more credibility since the GFC, predominately from our Asian neighbours but South Africans also see Australia as both a safe haven and good place to invest. The appetite for Australian property is stronger from Asia though, the strength of the AUD has seen this contract slightly in recent years and it deters US and European investors generally. The reality is that off shore investors, are affected by the strength of the AUD which is still at historically high levels and if/when the dollar returns to its long term average, I’m sure we will see significant weight in the market from off-shore investors, the “significant investor” visa is a good hedge for the government against the strength of the AUD at the moment and the maintenance of investor inflows has been underpinned with the “residency” carrot. That said, the savvy investors are in the market now, counter cyclically, they know that a big trigger for off shore inflows will be a drop in the AUD, they are capitalising on opportunities now, by building in a currency and physical hedge, they know that property isn’t just about numbers – the property you want on the cap rate you prefer to buy it at will probably not be available when the AUD is at $0.85…the smarter buying is going to be seen as now, when we look back!
Secondly, the Australian property market is attractive because it provides good diversity for investor types, whether they are passive investors or active, looking for reversion or strategic assets. Although property is subject to vicissitudes like any market, it has proven to be robust, It is going through changes at the moment as we are seeing retail under threat but yields in office and industrial are strengthening- offering good returns and in the case of industrial (bought well) a future land bank hedge. Alexandria, Waterloo, Zetland being a case in point as these become the new residential suburbs for Sydney. Good yields can be found nationally, tenancy risk is certainly a lot less than in the US and Europe, we have a good legal system, unemployment under 6%, and a strong banking system all under pinning the property sector.
MP: What recent trends have you been noticing with offshore purchase interest in Australian property?
Stuart:Interest in Office and Hotels is strengthening, Hotels look to have the strongest “visible” appetite at the moment from the Chinese/Asian investors particularly . The long term future of the tourism sector is excellent and with the wealth piling up on our door step in India and China, we will increasingly benefit from our proximity to these countries – and they know this; so are looking for hotels to accommodate their countrymen on their travels, get good returns on their investment and off-shore (bank) money. The inflows are going and will continue to strengthen into “direct property”, we agree with Ric Butler from CBRE, who pointed out recently that the “significant investor” visa program juts introduced, will see the majority of investor funds being deployed on a deal-by-deal basis into specific deals, not Funds. The Chinese prefer to own and control an asset, they invest differently to the traditional western style investment models.
Increasingly, the appetite for Australian property from Chinese buyers in particular is growing. If the number are right this could equate to around $3.5 billion a year. In China alone it is estimated there is around 1.2 million HNW households with a combined $4 trillion worth if investible assets. But off shore buyers need to be careful and they need to think about changing the way they think about sourcing and securing Australian property. They need to have a clear strategy, a clear path to completion, be sure they aren’t buying an over rented asset whose future vacancy could cause compress cap values, they need to consider that our legal system is different and also that the properties they are buying have agents representing the sellers interests and giving them advice, they should be sure to get a good team of advisers – legal, financial, technical DD and of course a Property Adviser (buyers agent, they are the manager and the striker if it was a football team)!
MP: Buyers agency is big in the USA but Australian property culture seems to have preferred to take advise from selling agents, when selling agents are remunerated by the vendor to get the highest price possible this seems a bit backward. What are your thoughts on this?
Stuart: You’re right, 70% of buyers in the US use a buyer’s agent however (unfortunately for them) they don’t pay the buyers agent, he/she gets there fee from splitting the selling agents fee. On the surface that sounds great right? But the problem is it isn’t independent, the buyers agent cant negotiate the best price and terms for his/her client if they are getting paid by the selling agent, the selling agent can just say no, its this much or nothing, the agent wants to get a fee so is conflicted and would probably say ok. It may make the path to completion smoother but the buyer is not have 100% independent representation by their agent – they can’t be, who ever pays is your master! Back in Australia, fortunately for buyers who use a buyers agent here, the agent is paid by the purchaser, it is illegal to take a fee from both sides of the transaction. Obviously i think its strange that more buyers don’t use buyers agents given we have engaged selling agents for over 100 years and happily paid them around 2% to get us the best possible and never given a thought to the fact that they work and are paid by the vendor. I here all the time that I have an agent on the hunt for me and it isn’t costing me anything – really? At the point the agent finds a property and brings the buyer into the deal, the agent needs to get paid and it will be the vendor paying the agent, and so right then and there the agent stops working for you and is working for the pay master.
MP: What are the benefits of engaging a buyers agency like Rose&Jones for an acquisition? Are there drawbacks?
Stuart: The major benefit is getting independent, objective, risk managed – “advice”. We wouldn’t go and invest $500,000 in the stock market without advice but we will do that with property and increasingly this is in the millions, in a single asset and with no “advice”. Information is not advice and purchasers need to know this, there is so much on the internet, we also seek it from family and friends and a good sales agent will have you seek his/her counsel and they will happily oblige providing the buyer with select information which crafts the story they want the prospective purchaser to buy into – conditioning to compete for the asset.
Not all buyers agents are the same, like not all selling agents are the same. The myth portrayed by many buyers agent is they will “save you money”, unless the valuation is more than you purchased the property for then you can’t claim a “saving” and 99.9% of the time this is the case. We have done it a few times but it’s not the norm and we have purchased over $1 billion worth of property. The correct approach is the buyers agent should make sure you don’t “over pay” (they are legally required to buy for the best price and terms) this is where you “save” but this is also at the end of the deal, there is a lot of work to do before you get to execute. It’s the advice piece buyers invest in, we are an investment – not a cost; it starts with the brief, then the Search (on and off market), short listing, reporting, assessing value (what is underpinning price and value – performance, floor plate, aspect, elevation, quality, uniqueness, peer testing, comparable analysis), risk adjusting (top down bottom up), asset performance (home or investment), technical due diligence, purchasing strategy, negotiating, price and terms, execution, exchange and settlement. Unrepresented buyers will be paying a fee most of the time, by paying more to an agent and a vendor for a property then they need to.
Clients will benefit from confidentiality and anonymity and our clients also tell us that they love that we are the only agent they need to deal with and best of all, we work for them!
The only draw back is not speaking to a buyers agent and in the process, and recognising that not all buyers agents are the same. You need to do your DD, REBAA.com.au is a good place to start.
Contact stuart on m + 61 414014783 | e stuart@roseandjones.com.au
Rose & Jones + 61 2 9327-6944 w www.roseandjones.com.au
Visit the MP Report click here
Boutique buyers agency firm Rose & Jones, based in Double Bay, deals predominately with high net worth's looking to expand their residential property portfolio as well as offshore groups looking to enter the Australian residential or commercial property market. With over 50 years of expertise and an impressive private client base, Stuart Jones talks purchasing trends and why of late off shore individuals are so keen to call Australia home.
MP: Can you give us an example of some of the transactions Rose & Jones have completed for clients his year?
Stuart: We are very fortunate to work for great clients who value what we do and bring to the property transaction, they prize our service and advice. A couple of examples of good deals we have done this year included the purchase of an office building for one of our South African clients (we now manage over $40 million worth of assets for them) for around $19 million in the western corridor of Sydney’s CBD. We did this transaction off market, fully tenanted with a net yield of 7.4% (and in case you were wondering, it was under rented with a good expiry mix, enabling us to improve the returns through negotiations and in time ne tenants). Our client was looking for good passing income on an asset that presented good upside via the tenancy and reversion of the asset over the medium term as well, and they sought our advice on the locations and why. We ended up focusing on the western corridor for a number of reasons, some which included it offers great value, its under developed, is an emerging market but buyers need to be discerning – a great reason to come and talk to us. Our client is really happy which we are delighted about, we are also managing the asset, it suits our client to work with us because we understand the strategy, we worked with them to devise it so it makes sense for them to have us roll it out – an end to end solution!
It’s not just the commercial piece, we purchase between $60 and $100 million worth of residential property annually, from $15 million plus homes to $600,000 investments. We bought a great semi in Bronte for a couple of New York based expats. The property was purchased for $1.58 million, it had sold for $1.72 million in 2009, it is fully renovated and we have been able to lease it on a 5% yield. Our client is happy, they have secured their first home for when they return in about 3-5 years, they are getting a over 4% net in income + capital growth (they will get total returns of 9% pa + on the conservative side) and they purchased below replacement cost which is a great outcome for them – valuer was happy too.
Another good buy was a 2 bedroom unit in Stanmore, in a small block of 12, north facing with off street parking and over 120m2 on title + parking. Our client is getting a 6% yield + Growth, it was bought at auction – with quite a bit of competition but our strategy worked, we secured the property below what we were prepared to buy it for, our DD showed it working as an investment, purchased on a 5.2% yield minimum, given the current return our “assessment” was vindicated.
MP: Why is Australian property so popular offshore?
Stuart: Firstly, Australia offers security for investors – politically, economically and financially, I think this is attractive to investors. These reasons have gained even more credibility since the GFC, predominately from our Asian neighbours but South Africans also see Australia as both a safe haven and good place to invest. The appetite for Australian property is stronger from Asia though, the strength of the AUD has seen this contract slightly in recent years and it deters US and European investors generally. The reality is that off shore investors, are affected by the strength of the AUD which is still at historically high levels and if/when the dollar returns to its long term average, I’m sure we will see significant weight in the market from off-shore investors, the “significant investor” visa is a good hedge for the government against the strength of the AUD at the moment and the maintenance of investor inflows has been underpinned with the “residency” carrot. That said, the savvy investors are in the market now, counter cyclically, they know that a big trigger for off shore inflows will be a drop in the AUD, they are capitalising on opportunities now, by building in a currency and physical hedge, they know that property isn’t just about numbers – the property you want on the cap rate you prefer to buy it at will probably not be available when the AUD is at $0.85…the smarter buying is going to be seen as now, when we look back!
Secondly, the Australian property market is attractive because it provides good diversity for investor types, whether they are passive investors or active, looking for reversion or strategic assets. Although property is subject to vicissitudes like any market, it has proven to be robust, It is going through changes at the moment as we are seeing retail under threat but yields in office and industrial are strengthening- offering good returns and in the case of industrial (bought well) a future land bank hedge. Alexandria, Waterloo, Zetland being a case in point as these become the new residential suburbs for Sydney. Good yields can be found nationally, tenancy risk is certainly a lot less than in the US and Europe, we have a good legal system, unemployment under 6%, and a strong banking system all under pinning the property sector.
MP: What recent trends have you been noticing with offshore purchase interest in Australian property?
Stuart:Interest in Office and Hotels is strengthening, Hotels look to have the strongest “visible” appetite at the moment from the Chinese/Asian investors particularly . The long term future of the tourism sector is excellent and with the wealth piling up on our door step in India and China, we will increasingly benefit from our proximity to these countries – and they know this; so are looking for hotels to accommodate their countrymen on their travels, get good returns on their investment and off-shore (bank) money. The inflows are going and will continue to strengthen into “direct property”, we agree with Ric Butler from CBRE, who pointed out recently that the “significant investor” visa program juts introduced, will see the majority of investor funds being deployed on a deal-by-deal basis into specific deals, not Funds. The Chinese prefer to own and control an asset, they invest differently to the traditional western style investment models.
Increasingly, the appetite for Australian property from Chinese buyers in particular is growing. If the number are right this could equate to around $3.5 billion a year. In China alone it is estimated there is around 1.2 million HNW households with a combined $4 trillion worth if investible assets. But off shore buyers need to be careful and they need to think about changing the way they think about sourcing and securing Australian property. They need to have a clear strategy, a clear path to completion, be sure they aren’t buying an over rented asset whose future vacancy could cause compress cap values, they need to consider that our legal system is different and also that the properties they are buying have agents representing the sellers interests and giving them advice, they should be sure to get a good team of advisers – legal, financial, technical DD and of course a Property Adviser (buyers agent, they are the manager and the striker if it was a football team)!
MP: Buyers agency is big in the USA but Australian property culture seems to have preferred to take advise from selling agents, when selling agents are remunerated by the vendor to get the highest price possible this seems a bit backward. What are your thoughts on this?
Stuart: You’re right, 70% of buyers in the US use a buyer’s agent however (unfortunately for them) they don’t pay the buyers agent, he/she gets there fee from splitting the selling agents fee. On the surface that sounds great right? But the problem is it isn’t independent, the buyers agent cant negotiate the best price and terms for his/her client if they are getting paid by the selling agent, the selling agent can just say no, its this much or nothing, the agent wants to get a fee so is conflicted and would probably say ok. It may make the path to completion smoother but the buyer is not have 100% independent representation by their agent – they can’t be, who ever pays is your master! Back in Australia, fortunately for buyers who use a buyers agent here, the agent is paid by the purchaser, it is illegal to take a fee from both sides of the transaction. Obviously i think its strange that more buyers don’t use buyers agents given we have engaged selling agents for over 100 years and happily paid them around 2% to get us the best possible and never given a thought to the fact that they work and are paid by the vendor. I here all the time that I have an agent on the hunt for me and it isn’t costing me anything – really? At the point the agent finds a property and brings the buyer into the deal, the agent needs to get paid and it will be the vendor paying the agent, and so right then and there the agent stops working for you and is working for the pay master.
MP: What are the benefits of engaging a buyers agency like Rose&Jones for an acquisition? Are there drawbacks?
Stuart: The major benefit is getting independent, objective, risk managed – “advice”. We wouldn’t go and invest $500,000 in the stock market without advice but we will do that with property and increasingly this is in the millions, in a single asset and with no “advice”. Information is not advice and purchasers need to know this, there is so much on the internet, we also seek it from family and friends and a good sales agent will have you seek his/her counsel and they will happily oblige providing the buyer with select information which crafts the story they want the prospective purchaser to buy into – conditioning to compete for the asset.
Not all buyers agents are the same, like not all selling agents are the same. The myth portrayed by many buyers agent is they will “save you money”, unless the valuation is more than you purchased the property for then you can’t claim a “saving” and 99.9% of the time this is the case. We have done it a few times but it’s not the norm and we have purchased over $1 billion worth of property. The correct approach is the buyers agent should make sure you don’t “over pay” (they are legally required to buy for the best price and terms) this is where you “save” but this is also at the end of the deal, there is a lot of work to do before you get to execute. It’s the advice piece buyers invest in, we are an investment – not a cost; it starts with the brief, then the Search (on and off market), short listing, reporting, assessing value (what is underpinning price and value – performance, floor plate, aspect, elevation, quality, uniqueness, peer testing, comparable analysis), risk adjusting (top down bottom up), asset performance (home or investment), technical due diligence, purchasing strategy, negotiating, price and terms, execution, exchange and settlement. Unrepresented buyers will be paying a fee most of the time, by paying more to an agent and a vendor for a property then they need to.
Clients will benefit from confidentiality and anonymity and our clients also tell us that they love that we are the only agent they need to deal with and best of all, we work for them!
The only draw back is not speaking to a buyers agent and in the process, and recognising that not all buyers agents are the same. You need to do your DD, REBAA.com.au is a good place to start.
Contact stuart on m + 61 414014783 | e stuart@roseandjones.com.au
Rose & Jones + 61 2 9327-6944 w www.roseandjones.com.au
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