October 2024: Company Updates
In addition to settlement of two new facilities and one maturity and repayment, Ark had a milestone month in October moving into a new Melbourne office and launching the inaugural Ark Urbis Macroeconomic Property Outlook.
The two new facilities are an industrial land and construction loan in Adelaide; and a land loan secured by two residential development sites, also in Adelaide. This continues our focus on Adelaide as a market that we have seen opportunity in across the residential and industrial sectors for some time. Our one maturity and repayment in October was the APH Mt Albert facility which was repaid early after the property was put to the market and sold albeit at a discount to the most recent valuation. The sale resulted in 100% repayment of all principal, interest and fees which was a very good outcome given the liquidity issues that the APH Group have been experiencing.
New Melbourne Office
During the month the Melbourne team moved into its new office located in 33 Stewart Street Richmond, a new state of the art building developed by Slimform Australia and with an exceptional new fitout designed by Cera Stribley. The office will position Ark well to continue to deliver high performance outcomes to our investors and development partners as we continue to grow the team and our funds under management.
Ark Urbis Macroeconomic & Property Outlook
The inaugural Ark Urbis Macroeconomic & Property Outlook report for Spring 2024 was released on 29 October. We were pleased to host a number of our current and prospective wealth managers over lunch to present the report and the Ark investment settings which are informed by the collaboration with Urbis, one of Australia’s pre-eminent multi-disciplinary real estate advisory and research groups.
The property markets and sectors in Australia that Ark invests in are dynamic and are influenced by different factors depending on geographic, macroeconomic and demographic factors. Ark is constantly reviewing these markets and sectors to identify risk and opportunity. The current Ark investment settings formally updated in October are summarised below.
Investment Setting: No Change
Investment Setting: Shift in Settings
What does Trump Mean for Australian Interest Rates?
Finally, what seems like the longest running election process we have ever experienced is over and the world is preparing for the second coming of President Trump. What does it mean for the Australian economy and importantly interest rates? Time will tell although you can always get a good feel from the markets which are suggesting that the next Trump government is likely to be likely to be challenging for economic growth in Australia and higher for longer interest rates.
As it became clear that Trump was not only going to win the presidency but also control of the House of Representatives and Senate, the Australian dollar slumped 2 cents to US65 cents, and the yield curve on bond rates jumped higher. The market is clearly saying that Trump’s inflationary policies including significant corporate and personal tax cuts, increased defence spending, deporting migrant workers and bigger budget deficits are going to make it much harder for the US Federal Reserve to maintain inflation within target range. Inflation and interest rates in the world’s biggest economy have a ripple effect across the world supporting the higher for longer thesis.
The impact on Australia is more nuanced due to Trump’s intention to also impose 60% tariffs on China and a weaker Chinese economy has significant impact on our economy given that they are our largest trading partner. Australia exports $200 billion or 37% of annual exports to China and therefore a weaker China means a weaker Australia. This is largely why the Australian $ fell during the week, also adding to the concerns about elevated local inflation.
A second Trump presidency was always going to be interesting and now we will see what happens! Ark will maintain a conservative approach to interest rates, ensuring our rates are variable, linked to the RBA cash rate and with structured rate floors