The $35 billion Victorian Funds Management Corporation (VFMC) has recruited a senior property analyst from Jones Lang LaSalle as it targets the office property sector.
VFMC head of property Pete King said new recruit Toby McMillan would provide strong valuation and due diligence skills that would assist the manager as it continued to monitor underlying managers in its $2.7 billion unlisted property portfolio.
The state-owned funds manager invests in 30 property funds and often sits on the advisory boards and investment committees to gain insights into how these assets are managed, King said.
Given the long-term liabilities of its insurance and superannuation clients, core domestic real estate formed the “backbone” of VFMC’s portfolio, he said.
Encouraged by vacancy rates of less than 8 per cent and improving rental growth, VFMC favoured the office property markets of Sydney and Melbourne.
During the financial crisis, VFMC focused on maintaining the strength of its portfolio while also making opportunistic investments in wholesale retail and office funds where secondary units were trading at attractive discounts of between 15 per cent and 20 per cent.
“These discounts have all but disappeared. The opportunity now is to try and choose better funds with sound long-term prospects. These are usually funds with low levels of gearing, under 20 per cent, with high-quality retail and office assets,” King said.
The majority of VFMC’s property portfolio is invested domestically while the remainder is predominantly allocated to Asian and European markets.
VFMC aims to outperform the Mercer/ IPD Pooled Property Funds Index, which has seen it deliver 6.73 per cent against the benchmark’s 7.54 per cent in the five years to December 31, and 10.76 per cent over a one-year period against the 10.27 per cent from the benchmark.
At Jones Lang LaSalle, McMillan specialised in valuation in the commercial and industrial property sectors. He replaced Stephen Chu at VFMC.