360 Capital Group

strategy

360 Capital Group Limited (360 Capital) is a real estate investment and funds management group that concentrates on the strategic investment and active management of direct real estate and real estate-related assets.

The company actively invests in direct property assets, property securities and various corporate real estate acquisitions within Australian real estate markets on a private equity basis.

360 Capital Group’s 15 full time staff have significant property, funds and investment management experience. 360 Capital Group manages nine investment vehicles holding assets valued at over $1.48 billion on behalf of over 12,000 investors and has over $220 million worth of co-investments across the 360 Capital Group.

In line with stated strategy, the Group is now a pure funds management and co-investor group, with the disposal of the Hurstville investment property recycled into higher ROE co-investments.

The Group will continue to maintain its “capital light” strategy, opting to grow earnings and distributions per security in excess of its peers from a tight capital base.

The Group now has sustainable and very visible earnings from its funds management division (through recurring management fees and other associated fees) and through its co-investments (from its income distributions) following the maturation of its business model.

Without taking into account any future growth in FUM, the growth in FUM during FY17 is forecast to provide $9.3 million in recurring management fee revenue, a 6.9% increase on FY16, with recurring fees forecast to be approximately $10.0m p.a. annualised going forward. Similarly, the recent growth in the Group’s co-investments in its self-managed AREITs (TIX, TOF and TOT) and other organic fund distribution growth is forecast to provide $16.5 million in distribution income for FY17, slightly lower than FY16 as the Group rationalises its unlisted trust portfolio.

For the co-investment division, the Group’s medium term aim is to exit its non-core unlisted co-investments by recycling capital into higher ROE activities is also expected to drive growth in distribution income above the base level outlined above.

Continuation of the Group’s capital recycling strategy is expected to provide additional “Active Earnings” not currently factored into our forecasts. Excess cash generated from capital recycling, together with potential FUM growth in the Group’s listed funds, are expected to result in additional operating earnings (including Active Earnings) to be generated from the funds management and co-investment divisions. These additional “Active Earnings” relate to potential upside from identified opportunities, and depend on market conditions and the Group’s ability to organically grow existing funds and continue to recycle capital into higher ROE investments as well as continued appreciation in the value of existing assets.

In view of the factors outlined above, the Group is pleased to provide FY17 Operating Earnings (excluding Active Earnings) guidance of 6.8 – 7.0 cps, in line with FY16.

Reflecting the Group’s strong position, the Board has elected to provide FY17 Distribution per Security guidance of 6.50cps, up 4.0% from 6.25cps in FY16.

 

The Group's key FY17 objectives are:

  • Continue our business plan of being a pure real estate fund manager and co-investor
  • Maximise value for our underlying fund investors and look to continue to grow listed platform responsibly.
  • Capitalise on our greatest asset being our management teams skills to provide revenue growth through new business opportunities
  • Utilise our strong asset base and experience to investigate alternative capital sources (wholesale, private equity and private mandates) as way to continue to grow the business
  • Maintain strategic business approach and recognise position in the cycle


To achieve these objectives, the Group’s key strategic focuses are:

 

  • Continue to sell down underwriting equity in Retail Fund No.1 ($28.5m) with an updated PDS due September 2016
  • TOF using its excess debt capacity to grow its asset base and increase its relevance
  • TOT restoring value to its securityholders and maximise its 14.7% stake in Industria REIT (IDR)
  • Advance the discussions to explore private institutional mandates to grow TGP’s sustainable revenue streams
  • Complete the disposal of Subiaco Square and recycle capital into listed funds
  • Continue the Group’s strategy of reducing exposure to unlisted trusts
  • Optimise all 360 Capital-managed fund debt facility tenures
  • Be mindful of where current cycle position, and continue to focus on our business plan of building recurring revenue streams and be opportunistic in our approach to creating value for our investors

 

Please click here for the HY16 Results Presentation by Tony Pitt