Constraints and patience the key to accessing alternative real estate

The real estate sector has long been a cornerstone of wealth generation in Australia, offering stable, income-generating assets that hold intrinsic value due to the finite nature of land. At The Inside Network Alternatives Symposium, Julian Biggins, co-CEO of MA Financial, outlined why advisers should be paying close attention to the opportunities emerging in the real estate market.

For financial advisers seeking diversification for client portfolios, real estate presents an attractive alternative asset class with a long-term horizon. And it is an asset class that Australians inherently understand, says Julian Biggins (pictured), co-CEO of MA Financial.

“Unlisted real estate provides uncorrelated returns compared to listed equities, particularly given the volatility we now see in listed real estate investment trusts (REITs),” Biggins told The Inside Network Alternatives Symposium’s this week. “It offers a defensive income stream, often generating 7 per cent–8 per cent yield, which is a significant premium to cash rates.”

However, real estate investment requires patience. The illiquid nature of the asset class means it is not suited to short-term trading strategies. “There are friction costs in getting into real estate – this isn’t a three-month hold,” Biggins warned. “It’s about long-duration investment, which aligns well with long-term wealth accumulation strategies.”

A key theme that emerged from Biggins’ presentation was the importance of location and scarcity. “Land is finite – that’s an immutable fact,” he said. “Whether it’s a residential block in Bondi or a shopping centre in Healesville, scarcity underpins long-term value appreciation.”

Biggins also highlighted the breadth of investment opportunities within real estate, extending well beyond traditional commercial and residential assets. MA Financial’s portfolio, for example, includes marinas, pubs, healthcare facilities, and industrial properties. “If you ask whether we like retail, the answer is yes – but not all retail assets are the same. A shopping centre’s value is shaped by the demographics of its surrounding area.”

One of the strongest investment thematics, according to Biggins, is supply-side constraint. “Construction costs have increased by 32 per cent since 2021, which makes new development prohibitively expensive,” he noted. “When you’re acquiring assets at a discount to replacement cost, you have a significant margin of safety.”

Real estate’s role in alternative investments is further bolstered by Australia’s macroeconomic stability. “Unlike the US, where distressed real estate is trading at 20 cents on the dollar, Australia’s market is more stable,” Biggins explained. “We don’t over-leverage assets in the same way, and banks rarely foreclose. That means opportunities come from motivated – not distressed – sellers.”

Among the more innovative areas of real estate investment is operational real estate, where investors not only own the underlying property but also participate in the operating business. “Take our pubs portfolio – we own about $1.1 billion in assets, and we directly manage the operations,” Biggins said. “This allows us to capture both the real estate appreciation and the profitability of the business.”

The current environment presents a rare opportunity for advisers to guide clients into well-priced assets. “Valuations lag reality,” Biggins observed. “We’re acquiring assets at 30 per cent–40 per cent discounts compared to two years ago. The best transactions happen when sentiment is at its lowest.”

For MA Financial, these market conditions provide an opportunity to be highly selective. “We’re not rushing to buy distressed office buildings, but we see strong fundamentals in industrial, retail, and hospitality assets,” Biggins noted. “Shopping centres, in particular, benefit from necessity-driven spending and constrained supply.”

Founded in 2009 and listed on the ASX, MA Financial has grown into a diversified financial services firm with expertise in asset management, lending, and corporate advisory. The firm has a strong track record in real estate investments, with its opportunistic and income-focused strategies resonating with high-net-worth and institutional investors.

As interest rates stabilise and capital becomes scarcer, Biggins believes now is a moment of opportunity for real estate investors. “What we’re buying today will be talked about in five years as some of the best deals of the cycle,” he concluded. For advisers looking to enhance client portfolios with defensive, income-generating assets, the current market dynamics make a compelling case for strategic real estate allocations.