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Ashe Morgan transforms the District Docklands.

People & Companies / Latest News

Australia

Jan 30 2018

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As a bold countercyclical move in 2014, real estate investment and advisory group, Ashe Morgan, acquired the ING portfolio known as ‘Harbourtown’ in Melbourne’s Docklands precinct. The asset was purchased for $146 million, less than half the replacement cost according to the insured value at the time and well below its $160m valuation.  Although there were question marks around the asset due to its  complexity, Ashe Morgan’s delivery on the robust value-add investment strategy is breathing fresh new life into the re-branded asset; The District Docklands. Ashe Morgan is on track to achieve its double-digit forecast returns to co-investors.

MP Report spoke with Alton Abrahams, Principal at Ashe Morgan about buying well and the execution of the asset strategy.

MP: The asset is over 7 hectares and comprises a combination of real property assets and several development sites, what were the standout property aspects initially?

AA: The outstanding location was key. Also, the portfolio had rental income from day one from its various stabilised assets as well as quality residential development sites that could immediately be sold for cash flow. Also, the significant upside available in repositioning meant that it fitted our internal mandate from the perspective of delivering enhanced risk-adjusted returns to our investors.

MP: Ashe Morgan recently in November [2017] relaunched the center with a rebrand as ‘The District Docklands’, it was an exceptionally bold move acquiring such a complex asset at the time, especially when  retail has been dubbed difficult due to the entry of Amazon and other online retailers to the market. Can you expand on where Ashe Morgan saw the opportunity to add value, and what did you see as the primary downside risk mitigation?

AA: Three primary factors attracted us to the deal and which we saw as opportunities that outweighed any of the risks associated with the asset:

Firstly the location, the Melbourne Docklands area continues to transform into a modern residential, commercial and tourist destination. Docklands is one of Australia’s most significant urban renewal projects,  encompassing 200 hectares of land immediately west of the Melbourne CBD, and currently has limited amenity and retail offering for this sizeable residential population. The immediate catchment provides a demographic of a residential and working population of around 2.3 million, which is projected to grow to 2.8million by 2026. Additionally, the asset is very well located on the fringe of Melbourne’s CBD with  immediate access to major arterial roads including Citylink with some 220,000 vehicles a day and Footscray Road with a further 40,000 cars passing daily. The free Melbourne Tram network also operates within  Docklands with a tram stop positioned at the entrance of The District Docklands. Also, the site is adjacent to Costco which currently attracts over 1 million visitors per annum and will be a great compliment to our offerings within The District Docklands.

Secondly, buying well.  The acquisition was negotiated off-market with a price reflective of less than half replacement cost.  We saw this as an excellent starting point to capitalise on an income producing  property with long-term value upside, through re-shaping the tenancy mix to drive non-discretionary spending to enhance the shopping experience for customers.

And thirdly, the state of the retail landscape.  Despite the market noise of interruption of retail through online retailers and most vocally Amazon, we saw The District Docklands asset as being able to capitalise on the shift in bricks and mortar retail fulfilling more social, interactive and community-based retail experiences.  In our research we identified the opportunity to transform Harbourtown from its original factory outlet style offering, to be able to provide this enhanced retail experience at The District Docklands.

MP: What part of the initial strategy has Ashe Morgan executed on so far?

AA: We have been focusing on developing our comprehensive masterplan and repositioning strategy for the asset, which integrates the Shopping Centre with the adjoining development sites and establishes a  clear identity and market position for The District Docklands.

We have undertaken the construction of the roof canopy and ambiance upgrades, including landscaping, playground, plaza area and furniture. This, in turn, has allowed us to secure new leases for the existing centre and being to diversify the tenancy mix.  We have also completed leasing pre-commitments that underpin Managements next focus being to provide a more holistic offering including entertainment, lifestyle, leisure and fresh food.

MP:   The strategy has evolved since Ashe Morgan first acquired the portfolio and there has been a second capital raise to enable the unlocking of further value than initially contemplated.  Can you provide some detail on this?

AA: There is an opportunity to add significantly more value than we originally anticipated, which is an excellent outcome for our investors and for us.  It became clear when dealing with existing and prospective retail tenants that something more than ambiance upgrade was required to now position the asset as a Major Regional Shopping Centre.  Since acquiring the District Docklands, we have repositioned the asset via new roof canopy and ambiance works, securing more than 6000 sqm of new retail leases and developing our comprehensive repositioning strategy which now integrates the shopping center with the adjoining development sites.  We have achieved lease pre-commitments from Hoyts for a world-class cinema complex as well as Woolworths for a full-line 4,000sqm supermarket. Global fashion retailer H & M have now opened, anchoring the fashion offer with a 2,300sqm store.  These significant brands underpin the development of our respective Entertainment, Leisure and Fresh Food precincts.

We have sold off the Southern development site to a residential developer which will add further density to the precinct. Marriott International will commence construction of a 200-room hotel mid-2018 with completion by the end of 2019. This will have a direct entrance into one of The District Docklands malls.  There are further development opportunities throughout the portfolio that we are working on currently. 

MP: Ashe Morgan has a strong track record of delivering double-digit returns, what was your forecast investor return on this asset at the initial capital raise:

AA: We co-invest our own capital in every deal we do, so are 100% aligned with our investor's interests.  The portfolio is exceptionally complicated, and there is a considerable amount of value that can be realised over the investment period. We originally forecast double-digit annual returns over a 7-year investment term, and the asset strategy is on track to deliver this to our investors.

SOURCE: Feature Article

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