Partner Sean McMahon chats with RF CorVal co-founder and Chief Executive Officer, Rob Rayner about opportunities, a significant move back to the retail funds space, and retaining an edge in a competitive market.
SM You’ve been active in the property funds industry for many years and established RF CorVal in 2009 with the aim of ‘getting real estate right’. How has RF CorVal evolved over the years?
RR Our original philosophy of trying to get property funds management right and taking an ‘investor first’ approach to everything we do has very much been a constant since we started out in 2009. We have of course grown and now have a team of 19 people located in Sydney and Melbourne. Importantly, we have developed a very strong culture, which has resulted in real team stability and harmony to collectively grow our business over time.
What has changed though is the breadth of our investor base, which now includes large Australian institutions, offshore groups, family and multi-family offices, and high net worth and retail investors. This support has been achieved on the back of the tailored approach we take to working with investors to develop bespoke solutions that meet their objectives, as well as the consistent returns we have delivered, which have averaged over 20 percent per annum across all we have done.
The other evolution has been our investment universe. Having started out with a focus on value-add office and industrial property, we now invest in a broad range of property, including hotels, land-leased communities, agricultural facilities, and NDIS accommodation. We have taken the same conservative approach, with a focus on risks and downside mitigation in everything we do, adding resources to our team or partnering with specialists to ensure we have the required in-depth expertise to acquire and manage property in these alternative sectors.
SM RF CorVal started out with two retail funds but has more recently focused on wholesale property funds. However, you have just launched the RF CorVal Property Fund into the retail market. What prompted this significant move back to the retail funds space?
RR This move was precipitated by requests from financial planners with whom we have existing relationships. These groups, who have both wholesale and retail clients, have seen how we operate and the returns we have achieved for their wholesale clients and asked if there was a way their retail investors could get access to RF CorVal investment opportunities.
On the back of this strong support, we have fully committed to the launch of what will be a flagship fund for RF CorVal – the RF CorVal Property Fund. The Fund will initially be seeded with interests in eight of our existing wholesale syndicates, providing investors with an interest in a well-diversified portfolio of 13 assets and offering an initial yield of 5.5 to 6 percent, underpinned by long-term leases, with a WALE of over 10 years.
SM RF CorVal invests across a range of property types. What is the outlook for RF CorVal in 2022? Where do you see the long-term opportunities?
RR Making investment decisions is always a challenge. Today, it is arguably even more difficult as we appear to be at an inflection point in the interest rate cycle and as we emerge from an environment shaped by the pandemic.
For 2022, we expect to see interest rates and bond yields continue to rise, although this cycle may be relatively short, given the high level of debt in the global system. We also think it is too early to fully understand the implications of Covid on behaviour, particularly regarding working and shopping habits.
We continue to see opportunities in alternative property sectors which are underpinned by longer-term structural trends, including disability housing and land-leased communities for retirees. We have also developed a strong track record in sale-and-leaseback and fund-through developments, particularly for food and agricultural-based facilities, and this continues to be an area of opportunity.
In the more traditional sectors, we have a focus on smaller industrial property in land-constrained, infill locations. We will selectively consider office opportunities where they offer a compelling proposition for tenants or the opportunity to actively manage the asset to generate attractive returns for investors.
SM How does RF CorVal retain its edge in a competitive market?
RR We are a relatively small team of great people who enjoy working together and that stability ensures we are extremely efficient. This allows us to assess opportunities very quickly and focus on deals
that offer the best risk-adjusted returns.
We also have a very close relationship with our investor base allowing us to target deals that meet their investment objectives.
The trust we have built with these investors has also enabled us to consider opportunities in alternative property sectors where we have brought the same disciplined investment approach with a focus on risk and downside protection. These alternative sectors are less crowded and have often presented better risk-adjusted returns.
SM What do you see as the most significant changes in the property funds industry in Australia over the years?
RR The biggest change is the consolidation and the growth of big local and global managers. This creates challenges, particularly when competing for larger assets, but it also provides some opportunities in smaller or less ‘institutional’ property for nimble operators like RF CorVal.