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 $4.6 billion direct property portfolio.
The state-owned funds manager invests in 30 property funds run by 15 managers and often sits on the advisory boards and investment committees to gain insights into how these assets were managed, and exercise some influence if needed, 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 10 per cent and improving rental yields, the manager was targeting 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 retail property funds that came to the secondaries market at discounts of between 15 per cent and 20 per cent.
“These discounts have all but disappeared. The opportunity now is to try and pick better funds with better long-term prospects that have tilts to offices,” King said.
The majority of VFMC’s property portfolio – up to 90 per cent – was invested domestically while the remainder allocated to the Asia and Europe markets.
The manager aims to generate “high single-digit” returns from the portfolio, he said, adding that its core retail and office properties were generally exposed to gearing levels of between 5 per cent and 15 per cent.
At Jones Lang LaSalle, McMillan specialised in valuation in the commercial and retail property sectors. He replaced Stephen Chu, who has joined Jetstar Airways as a business analyst.