As COVID-19 laid waste to Australia’s borders and investor fear halved the value of the Australian sharemarket’s A-REIT index earlier this year, property powerhouse Charter Hall went on a buying spree.
Ploughing on through the national lockdown and pandemic uncertainty, it leapt on a portfolio of supermarket Aldi logistics warehouses, paying $648 million for its efforts. That was quickly followed by a dozen more deals and, by the end of the year, Charter Hall had outlayed a whopping $3.5 billion on real estate during one of the most tumultuous business years in living memory.
The group, led by industry stalwart David Harrison, left competitors in its wake.
Its share and asset prices defied the pandemic gravity holding back a host of other landlords, particularly its once-proud retail counterparts – Vicinity Centres and Scentre Group – whose malls were decimated by harsh social distancing requirements.
And by November, shares in the group had soared above their February pre-pandemic heights.
For the well-respected Harrison – who has helped build the funds management giant from a nine-person operation to the largest commercial real estate owner in the country with 600 staff and $45 billion funds under management – standing still is not an option.
“We are one of the few companies that are in a better shape than pre-COVID and the reason is because we have focused geographically on Australia, but at the same time diversified across multiple sectors,” he says.
“I’m just a great believer that you need to be an expert in what you do.”
Even as the year comes to a close, the pace isn’t letting up. In the dying days of 2020, Charter Hall and its management have completed a whirlwind of deals including buying a Telstra building in Pitt Street, Sydney and a 100 per cent interest in a new Bunnings at Caboolture, Queensland for $28.1 million.
Harrison says the $6.8 billion ASX-listed company’s focus on properties with long leases to good tenants in a range of industries is proving bullet-proof in the face any COVID-19 recession.
“The 2020 financial year is Charter Hall’s 15th year as a listed company and while we have not been immune to the effects of COVID-19, the impacts have been limited through this focus on assets with long leases to high-quality tenants in predominantly defensive industries,” he says.
“More broadly, COVID-19 has seen accelerating demand for access to industrial and logistics assets, something we have actively pivoted towards.”
Identifying assets and managing them to add value has been one of the group’s key to success. “In the last five years, the dispersion between the top-performing REITs and the race to the bottom is wider than it’s ever been in my history,” he says.
And he’s not shy at pointing the finger at poor-performing peers. “You’ve got shockers like shopping centre giant Scentre and Vicinity because they own regional shopping malls. Even diversified entities, like GPT, particularly, has performed very poorly and the REIT index itself has not performed well,” Harrison says.
By contrast, Charter Hall’s returns have averaged 20 per cent per annum over the last 15 years versus the A-REIT index’s 3.7 per cent per annum.
With 30-plus years in real estate and 15 years at the helm of the property fund manager, Harrison has steered Charter Hall through some choppy real estate waters, identifying growth opportunities and deals.
We are one of the few companies that are in a better shape than pre-COVID and the reason is because we have focused geographically on Australia, but at the same time diversified across multiple sectors.David Harrison, Charter Hall chief executive
That insight has led the group to play in the traditional office, retail and industrial sectors, but also to aggressively branch out into alternative property assets such as service stations, data centres, pubs, healthcare, childcare and education.
Following his real estate agent parents’ lead, Harrison studied Land Economics at the former Hawkesbury University, now part of University of Western Sydney, before winning a scholarship at Raine and Horne Commercial. It was here that he started his career as a commercial real estate valuer. Before joining Charter Hall, Harrison honed his skills at the small estate agency First Pacific Davies, which has since morphed into global player Savills.
While COVID1-19 has been tough, Harrison maintains it is not a patch on the 1991 recession. “The toughest period I’ve seen in my career is the 1991 recession,” he says. “And in property, it was really the last time we had a dramatic reduction in values because there was oversupply, there was way too much speculative office and industrial development that occurred prior to that recession. And a lot of that was driven by the stock market correction in 1987.”
Once Australia gets a COVID vaccine, the world will return to normal, he says. “I think the quicker we can get a vaccine and all the health issues, social distancing, public transport, all those concerns of the coronavirus will dissipate and we will get back to a world where we will have a more permanent arrangement of working back in the office.”
That will be a welcome boost for Charter Hall and other office tower landlords who, for months now, have been urging a return of city-based workers.
Harrison himself spent the months of enforced lockdown at his Palm Beach house in Sydney’s northern beaches with his wife, three boys and daughter. They were all there “until my wife and daughter got fed up with us boys and came back to Sydney,” he says. Nevertheless, he still worked 13-hour days.
Another initiative Harrison is willing to push is the property sector’s gender imbalance. He is a supporter of the Male Champions of Change movement’s drive to increase equality.
To that end, he is adamant he will not go on all-men panels for property conferences, pushing organisers to increase female representation, saying otherwise he will be a “no-show.”
“I think the industry is done a bloody good job with a whole range of issues. But even in the last four or five weeks, I’ve had to decline invitations to go on panels where they don’t have a female.”
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Source: Thanks smh.com