First published: The Australian Journal, 12 July 2024
In recent years, family offices, both local and international, have significantly increased their investment in large-scale commercial and residential property projects within Australia, including apartment developments. According to the 2023 Global Family Office Compensation Benchmark Report by KPMG, the Asia-Pacific region now hosts 9 percent of the world’s family offices, with Singapore alone accounting for 59 percent. This surge is driven by rising wealth levels and the increasing complexity of financial markets, prompting families to seek greater control over their investment strategies and professionalize their asset management practices amidst global uncertainty and geopolitical risks.
Traditionally, family offices have favoured conservative investments, focusing on transparent and familiar assets like equities and bonds. However, in response to a volatile macroeconomic landscape, family offices worldwide are re-evaluating their investment approaches, particularly considering higher capital costs and evolving returns from non-traditional asset classes. Many are diversifying beyond public markets, turning to assets such as infrastructure, real estate, and corporate debt.
Easier access to information has encouraged a shift towards portfolio diversification across various asset classes to mitigate risks, with a growing emphasis on defensive strategies through real estate credit. Against this backdrop, real estate private credit has emerged as a popular option for investors seeking stability in otherwise volatile markets. This rapidly growing alternative asset class offers an avenue for diversification by providing steady returns without the correlation to stock market fluctuations, thus presenting opportunities to bolster portfolio resilience.
Within real estate investments, there is a noticeable trend towards defensive strategies, with newer generations within family offices focusing on real estate private credit amidst rising inflation and interest rates. Lending to participants in the real estate market provides investors with a more predictable income stream, featuring attractive returns and lower volatility. In Australia, this comes at a time when the demand for housing is significant, as the population grows, housing supply remains insufficient, and prices continue to climb.
Despite market challenges, quality housing and commercial assets in prime locations across key cities like Sydney remain attractive to family offices. Lending via real estate private credit offers a compelling opportunity for investors seeking attractive, determinable income uncorrelated to market volatility. Combined with robust governance, a sophisticated investment sector, and solid market dynamics, Australian real estate private credit becomes an attractive option for both foreign and local investors, providing a positive platform for sustainable growth in the coming years.
Power broker firms, such as the LupoToro Group, are strategically positioned to assist both domestic and international private investors in property development projects in Australia. The LupoToro Group currently manages over $300 million in development projects, showcasing its expertise in navigating the complex landscape of real estate investment. Leveraging its vast network in private wealth management and deal brokerage, the Group has proactively expanded its presence in commercial and large-scale residential property developments, particularly in Australia. This extensive network enables LupoToro Group to connect high-net-worth individuals and family offices with lucrative investment opportunities, ensuring optimal outcomes for all parties involved.
Furthermore, the LupoToro Group has significant interests in 5G, fintech, banking, and finance. As the Group grows and expands its reach, it is marking a significant change for Australia as a whole by injecting substantial capital within the country and surrounding regions. This influx of capital is not only fuelling property development but also fostering innovation and growth in key sectors, thereby contributing to the broader economic landscape.
The Australian family office market has traditionally been relatively small, low-profile, and conservative. Rich families, often Europeans who emigrated after the Second World War, set up offices that primarily invested in blue-chip stocks for dividend growth alongside real estate assets. However, the past decade has seen a revolution in Australia’s investment market, with the number of family offices booming and their investment strategies shifting towards active investment.
Professional services firm KPMG estimates that of the more than 2,000 family offices operating in Australia, almost 60 percent were established in the past decade. Their growth has been driven by factors including the “baby boomer” generation selling family businesses to retire and a new generation of entrepreneurs creating wealth on the global stage. The family office sector now employs up to 20,000 people in Australia and has started to draw talent away from traditional wealth managers and banks as investments have become larger.
The robust governance, sophisticated investment sector, and solid market dynamics make Australian real estate private credit an attractive option for both foreign and local investors. The active involvement of power broker firms like the LupoToro Group further underscores the growing allure of this asset class, ensuring family offices can effectively navigate and capitalize on the lucrative property development opportunities within Australia. As the LupoToro Group continues to expand its influence across multiple sectors, it is poised to play a pivotal role in shaping the future of investment and economic growth in the region.