Global real estate as a store of value

--  |   18/02/2021 Text size  Decrease  Increase   |  
email_fwd
<p><strong>Lex Hall: </strong>COVID has changed the way we think about many things, and one of those things is real estate. What sort of impact has the pandemic had on it and what will the future hold? Today, I thought I'd catch up with Chris Bedingfield from Quay Investors. He oversees Quay's Global Real Estate Fund.</p> <p>Good day, Chris.</p> <p><strong>Chris Bedingfield: </strong>Good morning, Lex. Thanks for having me.</p> <p><strong>Hall: </strong>My pleasure. The first thing I wanted to ask you, Chris, was what sort of place should global real estate occupy in the portfolio of the average retail investor do you think?</p> <p><strong>Bedingfield: </strong>Yeah, I think sometimes it gets overlooked as an asset class that can diversify against, say, other global equity type exposure. So, nothing sort of has shown that more so than, I guess, over the last couple of years we've seen, on the equity side, global equity side, tech stocks do very well and then, real estate can sort of be the offset to that, can be quite a diversifier in terms of that. I think also the other trap that sometimes investors might feel as though&mdash;you know, I have my house, or I might have an investment unit here in Sydney or in Melbourne, so do I really need to double up on real estate? And I think when you think about global real estate, there are just so many different types of exposures you can get, which are highly not correlated with residential, such as self-storage or data storage or industrial property, and way beyond the traditional shopping centers and office buildings and those sectors are not correlated even within themselves. And so, it can add diversification and it can present investors with unique investment opportunities.</p> <p><strong>Hall: </strong>Okay. That's a really interesting point. I should say we'll talk about a few stocks that illustrate what you are saying about the diversification. Rough year in 2020 not only for you, a worse year for the index. What were some of the key challenges do you think?</p> <p><strong>Bedingfield: </strong>Yeah, again, this comes down to not all real estate is the same. Some sectors have done very well during COVID&mdash;real estate sectors have done very well during COVID. Some of the stocks that we own in our portfolio continue to hit all-time highs. We are unhedged. So, the Australian dollar, the rally in the Australian dollar has sort of crimped our returns a little bit. But at the other end of the spectrum, you've had sectors that have been very disproportionately affected. So, coastal apartments in the United States, shopping centers, office buildings, I mean, they're probably the main sectors that have been hit pretty hard. Real estate&mdash;and I think this points to an opportunity. Real estate has been a sector that has been asked to shoulder the burden more than pretty much any other sector in equities. So, maybe apart from banks. But the government has basically said, here comes the virus, we need to do something to help everyone out. By the way, real estate, you've got to help as well. And that's been reflected in the pricing and particularly those sectors I mentioned a moment ago.</p> <p>As we move through the virus and hopefully, the vaccine does its job, those headwinds for those sectors are going to become very, very large tailwinds. And so, that's where the opportunity lies. I mean, it really is a stock picking process. Like I said, some sectors have done extremely well, and others have been, you know, through legislation as much as anything else, have been hit pretty hard.</p> <p><strong>Hall: </strong>Yeah. I should say the Quay Global Real Estate Fund has posted 10 per cent since its inception in 2014. Five years ago, Chris, you were saying the risk to investors is sustained low interest rates and look where we are today. They're talking about low interest rates up until 2024. To what extent can global real estate still be an income provider?</p> <p><strong>Bedingfield: </strong>Well, I think at the end of the day, global real estate does get categorized as an asset class to provide income. And I think it's a bit dangerous to think about it like that. We think about it in terms of total return. And if you think about some of your viewers or yourself, some of your best investments, probably one of the best investments you've ever made in your life is probably if you bought a house or an apartment 15 years ago or 20 years ago, if you're of that age. You would have outperformed pretty much every fund manager in the country and probably (indiscernible) well. And you didn't buy it because of yield. You bought that house, or you bought that apartment&mdash;maybe some people did&mdash;but really, it comes from that very slow accreting capital growth over time. So, in a low interest rate environment, the growth becomes even more important, I guess. And so, that's where our focus is and I would caution people to think about real estate for just yield, because that can sometimes lead to traps.</p> <p><strong>Hall: </strong>All right. Let's talk about that diversification that you mentioned. I noticed two of your biggest sector weightings at the moment are multifamily apartments and storage. What sort of expectations do you have in those two?</p> <p><strong>Bedingfield: </strong>Yeah. So, storage is broken up into two components and the larger component is European self-storage. It's a really simple business as I'm sure maybe a lot of people who are watching this would know. It's driven by the three Ds&mdash;death, divorce and dislocation. And what we've seen it really is economically agnostic. It does well despite the economy. Its biggest issue is generally supply or excess supply. But look, one of the best real estate stocks you could have owned 25 years ago was a storage company in the United States called Public Storage. Storage industry in the United States was in its infancy back then. Not a lot of product awareness. And here was a company that was an expert in its field. It consolidated the market, grew its position and as user acceptance sort of grew, it grew into that, and Public Storage has outperformed by multiples most of the major industries, and even some of the well-known tech stocks.</p> <p>If you think about European storage, it's basically where U.S. storage was around 25 years ago. So, the amount of supply of storage in the United States is 9 foot per person. In Australia, depending on the numbers you're looking at about 3 foot per person and in Europe, it's 0.5 foot per person. There are some unique opportunities where you can almost get in a time machine and go back 25 years and remake your investments and that's where a lot of our storage exposure is. It's in Europe. It's a multi-decade secular story.</p> <p><strong>Hall: </strong>I just wanted to finish by asking you about shopping malls. Are they still sort of seen as a&mdash;correct me if I'm wrong&mdash;as a sure thing because I read the other day that H&amp;M, a big fast fashion retailer, which is probably an anchor tenant in a shopping mall, is closing some shops? Does that tell us anything? Is that a risk or&hellip;?</p> <p><strong>Bedingfield: </strong>Yeah, it tells us&mdash;so, our thesis on retail is, you need to be very local community orientated needs-based retailing, so things like supermarkets or hairdressers, pharmacies and the like. We think that does really well. That's literally your last mile delivery that the industrial guys are trying to replicate. So, we think they do okay. And then, we think the other end of the spectrum, which is the most productive, big traffic, high sales per square meter shopping centers, they will do well as well. So, you either got to &ndash; you got to pitch yourself as being incredibly convenient or pitch yourself as being incredibly experiential, almost like the day out.</p> <p>In between is probably where the risk really lies. The shopping center that isn't really convenient, it doesn't really offer that big experience, it's just a place to go and pick up stuff. We think that&mdash;we would call that largely sub-regional shopping centers in Australia. We look around the world, there are the shopping centers that are struggling the most. That's where ecommerce&mdash;if you want stuff, you just go online, and you get it. And have the experience, then you got to go to those better shopping centers. So, what you're hearing about retailers closing stores, that's our thesis. Our thesis is, the retail model going forward is no longer to have stores in every shopping centre across the country, which was the old model. The new model will be to have maybe 5, 10, 20 stores in the best locations with the best footfall, with the most number of eyeballs going past your brand, that's generating the high level of sales, because those stores are no longer about distribution. They are about distribution, brand, marketing, product positioning, customer service, customer interaction, which you can't&mdash;Amazon can't compete against that, and that's the way retail is going to go forward. So, the number of stores will be less, but the stores they'll have remaining will be more strategically important.</p> <p><strong>Hall: </strong>Okay. I forgot one crucial sector obviously and wanted to get your thoughts on that, offices. What's your take on that?</p> <p><strong>Bedingfield: </strong>We haven't owned office buildings in the Fund now for five years. We fundamentally believe you shouldn't own an office above the cost to build. But in the United States, right now, they've just been slaughtered, and the pricing looks really interesting to us right now. We think we can own office buildings in Manhattan, Midtown Manhattan for a half the cost to build. We don't believe the story that the big cities of the world are going to fall into the ocean. We've had 4,000 years of urbanisation. I don't think that's going to change anytime soon. Right now, there's the panic. Now is the time to start picking around the edges and finding those opportunities that in five years' time people are going to keep themselves that they missed out on.</p>

Video Archive...

One year on: lessons learned from the 2020 bear market
25/02/2021  The biggest takeaway from that period is not to panic when the market tumbles.
What if...I want to buy a gold ETF?
23/02/2021  From ETFs backed by bullion to miners with more upside potential - here's how to get yourself some gold.
'Full return to normal in 2021'
23/02/2021  If the US is to stage a recovery by mid-year, it will need the consumer services sector to fire, says Morningstar's head of economic research Preston Caldwell.
Google, Facebook versus Aussie news stocks
19/02/2021  Morningstar's Brian Han weighs up News Corp's deal with Google and examines the effect of Facebook's decision to block content from Australian media outlets.
Global real estate as a store of value
18/02/2021  Quay Global Investors' Chris Bedingfield explains how self-storage, data centres and industrial property can offer diversification and growth.
Spotting the 'covid winners'
16/02/2021  Uniti Group and Nextdc are among the companies that SG Hiscock's Hamish Tadgell says have flourished during the pandemic.
The transition from hope to growth
15/02/2021  Hamish Tadgell of SG Hiscock explains the portfolio changes he’s made in a bid to capitalise on the shift.
The future of the US economy
10/02/2021  Which pandemic-related trends have already passed, and which ones might be around the corner?
GameStop frenzy is history repeating
05/02/2021  The battle between the Reddit army and hedge funds is nothing new—the question is will regulators be willing to step in, says Morningstar's John Rekenthaler.
Who are the fast fashion winners?
03/02/2021  Competition is fierce for fast fashion retailers such as Asos, H&M, Zalando and Inditex. Morningstar analyst Jelena Sokolova takes a look at the sector.
Can your portfolio withstand volatile times?
01/02/2021  Volatility can be around any corner, says Morningstar director of personal finance Christine Benz.
How much equity exposure is too much in retirement?
28/01/2021  Retirees require stocks' growth potential, but they need a cash and bond buffer, too.
Key trends for China investors
27/01/2021  Rebecca Jiang, manager of the JPMorgan China Growth & Income Trust, looks at why Chinese stocks soared in 2020 and whether the trend can continue.
Redpoint's 3 top picks in industrials
25/01/2021  Redpoint's chief executive and portfolio manager Max Cappetta tells Lex Hall why he's got his eye on JB Hi-Fi, Goodman and Reliance Worldwide in 2021.
Looking for growth and income among industrials
21/01/2021  Redpoint CEO and portfolio manager Max Cappetta looks at the dividend potential of large-cap names, the resilience of Qantas, and the local tech landscape.
What we expect from oil prices
19/01/2021  Stocks still look cheap across all subsectors, especially oilfield services and refining, says Morningstar analyst Dave Meats.
What’s app-ening: investing from your phone
19/01/2021  What are the rewards and risks of using this technology?
A Democrat clean sweep and corporate America
15/01/2021  Morningstar's head of policy research Aron Szapiro explains what sort of changes a Biden government will make and how they will affect company valuations.
3 stocks for climate transition
14/01/2021  Freight-rail, building temperature efficiency, and carmaking are among the sectors Aviva Investors' Jaime Ramos Martin has his eye on.
The outlook for dividends
13/01/2021   Dividend investors had a hard time in 2020, but Morningstar analyst Dan Lefkovitz think the outlook is brighter for the year ahead.
3 themes for fund investors in 2021
11/01/2021  Morningstar Investment Management's Dan Kemp reveals the three investment themes on his mind for the year ahead.
What next for oil and gas companies?
06/01/2021  Morningstar equity analyst Allen Good looks at the prospects for oil and gas giants in the year ahead. 
China outlook 2021
05/01/2021  China had a strong year after a rocky start, but can it continue—and what does a US President Biden mean for the region? Morningstar analyst Lorraine Tan explains.
Tech, travel and trends for 2021
04/01/2021  Morningstar equity director Alex Morozov considers the outlook for tech, travel and beyond for the year ahead.
Money and investment lessons of 2020
01/01/2021  How to plan for things you can't plan.
Morningstar Year in Review 2020
25/12/2020  2020: we look back at the highs and lows of an unprecedented year in financial markets and explore the themes shaping 2021.
Are music streaming companies a big hit with investors?
22/12/2020  Music streaming companies have seen stellar growth in user numbers. We ask Morningstar equity analyst Neil Macker if the trend can continue.
What Tesla's inclusion in the S&P 500 means for investors
21/12/2020  While it stands as the largest addition in the index's history, this likely won't impact everyday investors all that much. 
Peter Warnes and the 2021 Forecast
18/12/2020  Will there be opportunities to deploy cash in the new year? Will there be a reprieve from covid? And what will the incoming Biden administration mean for markets?
Investing in the climate transition
18/12/2020  Companies that specialise in solar, building efficiency and renewables underpin Aviva Investors' Climate Transition Global Equity Fund, says Jaime Ramos Martin.
Why does liquidity matter?
16/12/2020  Why does liquidity matter to investors, and how can it affect your returns? Morningstar equities director Tom Whitelaw explains.
Introducing the Morningstar Capital Allocation Rating
14/12/2020  Learn what we look for when rating a company.
Incorporating ESG into our equity research process
14/12/2020  Morningstar's new approach unpacks the environmental, social and governance risks that companies face.
Tagliaferro: yield ideas for your portfolio
10/12/2020  Industrial companies typically generate better cash flows and can offer a steady income stream, says the IML founder.
Anton Tagliaferro on value versus growth
09/12/2020  The lofty valuations of Tesla and Afterpay typify the effervescence and speculation in the market, says the IML founder.
Can car companies be ESG investments?
08/12/2020  Car makers may not be an obvious investment choice for ESG-conscious investors, but Morningstar analyst Tancrede Fulop says some of the largest companies score highly in some measures such as safety and human capital.
The US and China under president-elect Biden
07/12/2020  Janus Henderson's Matt Peron considers how the relationship between the US and China will evolve under a President Biden.
Investing basics: what is active and passive investing?
04/12/2020  What is active investing, and what is passive investing? We're at the whiteboard to explain the pros and cons of each 
Why we still like Treasury Wine
04/12/2020  Treasury Wine Estates remains an undervalued stock in spite of China's demand-destroying tariff on Australian wine. Morningstar director of equity research Adam Fleck explains why.
What is gold worth?
03/12/2020  And do any other assets currently compare?
Why now is the time for ESG investing
02/12/2020  We're at an inflection point in ESG investing, says Sustainalytics founder Michael Jantzi. Here's why. 
10 stocks retail investors bought in covid sell-off
01/12/2020  Beaten-down travel stocks and BNPL providers featured heavily, says nabtrade’s Gemma Dale.
How retail investors seized on covid sell-off
30/11/2020  Many people were waiting for the opportunity to buy shares at historic discounts, says nabtrade’s Gemma Dale.
AMP: difficulties now, but dividends later
27/11/2020  The 171-year-old wealth manager has had its scandals but there's merit to its turnaround strategy and the quality of its other assets, says Morningstar's Shaun Ler.
'Be careful using buy now pay later'
27/11/2020  BNPL products such as Zip Co help boost consumer spending but they come with risks and are overvalued, says Morningstar analyst Shaun Ler.
Hamish Douglass: Winners and losers in the covid era
26/11/2020  The Magellan co-founder argues the ecommerce acceleration is here to stay and ponders the effect it will have on other sectors such as travel and commercial real estate.
A 'wonderful hunting ground'
25/11/2020  Greg Dean of Cambridge Global Asset Management explains why the consumer services sector has yielded healthy returns.
Hamish Douglass and big tech
25/11/2020  Magellan's co-founder explains which tech behemoth the Magellan Global Fund no longer owns, why one was too tricky to value, and why regulation is no threat.
Hamish Douglass: 'We're lucky this pandemic hit when it did'
24/11/2020  Magellan's co-founder on why 2020 resembles 2000 and why covid-19 is a dry run for something that could be much worse without proper planning.
Should you beef up your exposure to meat processors?
23/11/2020  Their shares have gotten hammered this year. Are they opportunities or value traps?
What is the Morningstar ESG Commitment level?
20/11/2020  Our new rating highlights the degree to which a fund or asset manager considers environmental, social, and governance issues.
What's driving the flows into ESG funds
19/11/2020  Morningstar's Grant Kennaway explains why sustainable funds are increasingly popular and why they're performing well. 
Too much upside baked into Bunnings: Morningstar
17/11/2020  Morningstar director of equity research Johannes Faul looks at home improvement retailer Bunnings.
What is ESG?
16/11/2020  From climate change to workers' rights, ESG is a big part of the investing world. We're at the Morningstar whiteboard board to explain what it means and why it matters.
"I'm still cautious": Peter Warnes' best ideas for income investors
12/11/2020  We're not out of the woods yet, says our head of equity research, as he looks for safety in businesses we can't live without and shies away from the banks. 
Is it time to get exposure to China?
11/11/2020  Perhaps it is time to have exposure to this economic powerhouse and its 1.4 billion population, says Morningstar's Peter Warnes.
Tapping into the contactless spending boom
10/11/2020  What happens when you buy something when your bank card? Morningstar analyst Niklas Kammer explains which companies are benefiting from your transaction.
Can luxury stocks recover from covid?
09/11/2020  With travel bans and economic lockdowns, the luxury sector has been hit hard in 2020. But there are still opportunities, says Morningstar analyst Jelena Sokolova.
US election scenarios and what they mean for investors
05/11/2020  A discussion of taxes, stimulus, regulation, and the likely market reaction as results from the 2020 poll come in. 
Don't try to time elections
03/11/2020  Why you should resist the urge to make predictions when there's a disconnect between the economy and security prices.
3 names on the alternative protein shelf
02/11/2020  Etoro analyst Josh Gilbert shares his thoughts on Beyond Meat and two other companies making inroads into the plant-based meat sector.
Hamish Douglass: I'd be super surprised if Trump won
30/10/2020  The Magellan rainmaker explains why he doubts the Republican leader will prevail and why investors should brace for volatility—and ignore it. 
Gauging the appetite for alternative protein
29/10/2020  The market for plant-based meat is worth $14bn today and is expected to grow massively, says eToro's Josh Gilbert.
Browsing the opportunities aisle in retailing
28/10/2020  Morningstar equity analyst Johannes Faul explores the flipside to the surge in growth in online sales.
3 top Asian picks on Longlead's radar
22/10/2020  China and Hong Kong have been a happy hunting ground, says Longlead Capital Partners' co-founder Andrew West, who singles out tech, pharmaceuticals and power tools.
3 undervalued travel stocks we like
22/10/2020  These names stand to benefit from a resumption of leisure travel - and are all trading below our fair value estimates.
3 reasons to like bonds
20/10/2020  Morningstar's Mark Preskett looks at three reasons why bonds are an important tool in your investment portfolio.
The monopoly asset that could boost Link
19/10/2020  A bigger stake in the online conveyancer PEXA could be the key to increasing Link Administration's revenue, says Morningstar's Gareth James.
How Longlead Capital defied the covid plunge
16/10/2020  Longlead Capital Partners co-founder Andrew West reveals how his Asia-focused fund managed to make gains during the historic covid-19 sell-off.
Investing basics: why invest in bonds?
16/10/2020  The investment board is back with an explainer on why you might invest in bonds.
Retiring during a pandemic
13/10/2020  How to handle this decision—even when it is made for you.
3 top picks in sustainability and software
12/10/2020  Nick Griffin of Munro Partners reveals why and where he sees opportunities in renewable energy, diagnostics and software. 
Investing basics: what's your personal inflation rate?
09/10/2020  Take stock of your spending to determine if inflation is an issue for you.
Ant Group IPO: What you need to know
09/10/2020  Morningstar analyst Chelsey Tam explains why investors are excited about the flotation of Ant Group and why it's different from Alibaba.
Spotting the winners of tomorrow
06/10/2020  Companies that address the growing demand for decarbonisation will have a 20-year growth opportunity, says Nick Griffin of Munro Partners.
An interview with Whitehaven Coal chief Paul Flynn
30/09/2020  EXCLUSIVE EXTRACT: Morningstar's Mat Hodge and Lex Hall talk to the CEO of the independent producer and exporter about the company's fortunes and its future.
How to get rich slowly
30/09/2020  Slow and steady wins the financial race.
3 top picks in global healthcare
29/09/2020  American Century Investments' low-turnover strategy invests in companies developing vaccines, treatments for neuro-cognitive diseases and innovations in telemedicine.
Investing in the healthcare needs of the future
25/09/2020  By 2050, almost 20 per cent of the global population will be over 65 and demand for healthcare will climb, says Michael Li of American Century Investments.
Morningstar's Mat Hodge on Rio's fortunes
22/09/2020  The destruction of an indigenous cave shelter was unforgiveable but there are other reasons why the iron ore heavyweight is overvalued.
Cannabis: the world in 2030
21/09/2020  Morningstar equity analyst Kristoffer Inton on the outlook for the seven producers under coverage.
3 top picks for the EV revolution
18/09/2020  Morningstar's Seth Goldstein singles out three undervalued stocks that span the entire electric vehicle supply chain.
The 2020 election and your portfolio
18/09/2020  The bumps and bruises of election time may tempt you to shift your portfolio strategy.  
'The tech rally has gone too far'
17/09/2020  UK-based Premier Miton's Simon Evan-Cook says the tech rally of 2020 is reminiscent of the dotcom boom, but inflation could be a bigger threat.
Why EVs will be a common sight on the roads of the future
16/09/2020  By 2025, the cost of batteries and manufacturing will fall and EV functionality will improve, says Morningstar's Seth Goldstein.
Using personal data to better estimate retirement savings
11/09/2020  Estimating the length of your retirement with personalized information will help you save the correct amount.
2 China stocks we like
09/09/2020  Morningstar's Chelsey Tam reveals which stocks and sectors have shone—and which have underwhelmed.
How to be a better investor: episode 3
28/08/2020  Products, services, what is what in the world of finance—and how to look out for yourself
Where to invest for income
24/08/2020  A raft of companies have cut their dividends this year, leaving income investors concerned. But Morningstar's Dan Lefkovitz says there are still plenty of options out there.
DNR Capital's eye for gaming, building supplies and software
18/08/2020  DNR Capital's chief investment officer Jamie Nicol profiles some of the top ten holdings in his Australian Equities High Conviction fund. 
The trouble on Telstra's horizon
17/08/2020  Morningstar's Brian Han explains why he has trimmed his fair value estimate for Australia's dominant telco and the future of its dividend payout.
Finding bargains the market overlooks
14/08/2020  DNR Capital's Jamie Nicol reveals how his Australian Equities High Conviction fund finds quality businesses that will endure difficult conditions.
How to be a better investor: episode 2
13/08/2020  Put your money to work if you're looking for financial freedom.
How to be a better investor: episode 1
10/08/2020  Learn how to picture your goals so you can better reach them.
3 undervalued names in childcare
05/08/2020  Morningstar's Gareth James identifies three sector names trading at attractive discounts in an increasingly 'essential' sector.
Is the 60/40 portfolio dead?
05/08/2020  Reports of the strategy's demise are greatly exaggerated, says Morningstar's Christine Benz.
Why you should ignore a fund's yield
04/08/2020  Investors may assume a fund's yield to determine how much income it will pay, but it's not always so simple, warns Morningstar analyst Rajesh Yadav.
What are the right bonds for retirees today?
03/08/2020  It depends on your expectations and timeframe. Look at bonds as being portfolio stabilisers—sources of cash flow you can draw on when your equities are down, says Christine Benz.
3 top picks in rail, roads and utilities
28/07/2020  When utility stocks plunged during the onset of the pandemic Lazard Asset Management's Warryn Robertson knew it was time to jump in.
Infrastructure stocks in the covid era
24/07/2020  Lazard Asset Management's Warryn Robertson looks at how the pandemic has affected toll roads and airports and what the future of travel holds.