Photo credit: BBC.com
This week on the Front Cover:
- “A state ablaze: PM sends in 3,000 reservists, fires to burn for two months, 1,000 rescued from blazes, locals airlifted from Omeo, navy on way, insurance claims may top $600m”, The Age.
- “Share gain the best in 10 years spurred by surging global markets, three interest rate cuts with the potential of more rate cuts to come”, The Australian.
- Treasurer warned on risky funds as listed funds are rife with poor performance and conflicted commissions, AFR.
- “The Reserve Bank is expected to slash interest rates to new lows this year to buttress a recovery in growth”, AFR.
- “Drop hurdle rates or risk missing out: investment expectations need to be cut”, AFR.
- “North Korea ends nuclear pact”, The Australian.
- Melbourne is forecasted to be Australia’s biggest city by 2026, driven by strong interstate net migration, immigration and natural growth.
- The Australian reported the fastest national trough to peak recovery in Q4 2019 – Sydney and Melbourne rising by 6.2% and 6.1% respectively. The surge in capital value however forced yields to a record low – 3% in Sydney and 3.3% in Melbourne. (Andrew Wilson, 3/1/2020, House price surge biggest in a decade)
- AFR reported the rise of built-to-rent projects (BTR) in Australia. An established asset class in the US and UK, BTR are multi-unit buildings whereby developers rent out the building to households instead of selling the individual units. Current BTR projects in Australia include:
- Smith Collective (Gold Coast) by UBS Asset Management, Grocon and JLL.
- Element 27 (Perth) by Sentinel Real Estate.
- Sydney Olympic Park (Sydney) by Mirvac.
- Apartment block in Docklands (Melbourne) by Salta Properties.
- Apartment block in Victoria Market (Melbourne) by Mirvac.
(James Dunn, 11/11/2019, Building to rent is now an asset class)
4. AFR reported that companies are urged to reduce return hurdles to reflect lower interest rates. According to Reserve Bank governor Philip Lowe, some companies have hardwired hurdle rates at 13% – 14% and does not want Australia to miss out on assets due to unrealistic hurdle rates. Chief executives pushed back stating that long term view of rates should to be taken and higher asset prices are reflective of increasing risks despite falling rates. (James Thomson, 3/1/2020, Drop hurdle rates or risk missing out:Sims)
5. AFR reported the following top private equity deals in 2019:
- KKR acquisition of Arnott’s Biscuits from Campbell’s Soup ($3.2 billion).
- Silver Lake acquisition of TEG from Affinity Equity Partners ($1.2 billion).
- Quadrant acquisition of QMS Media ($572 million).
- PAG acquisition of Craveable Brands from Archer Capital ($457 million).
- Pacific Equity Partners acquisition of Horizon Global ($340 million).