Creating a new legacy

Carmel Hourigan’s push for progress is seen in city skylines, rewarded in investor portfolios and felt by a diverse and global team.

Tell us about your background and journey into real estate.

I have to start by saying my father had a big influence on my life. He was an academic at Hawkesbury Agricultural College [Sydney’s oldest agricultural college and now part of Western Sydney University]. He ran the food technology course there and all my life he had been teaching and talking to me about how you must go to university. He said – ‘why don’t you come out to Hawkesbury Ag – my mate is running this course called Land Economics. You could have your own business and as a woman wouldn’t it be fantastic to have the freedom.’ It was a long time ago, probably a bit ground-breaking. I did that course with around 15 girls and 150 boys.

And then worked through Sydney’s real estate industry?

It’s been an interesting journey. My mission was to be a broking analyst, so I went and got research jobs and I went here and there, I moved around a lot. I developed a really strong grounding and pedigree in research. I went to [Australia’s largest bank], the Commonwealth Bank, and became an assistant fund manager and 18 months later, I took on the role of fund manager. I ran the investment management platform at Lend Lease and then took on the role of Chief Investment Officer at GPT Group, before taking up the opportunity four years ago to become the Global Head of Real Estate for AMP Capital.

Tell us about real estate at AMP Capital.

Historically, AMP Capital has been one of the biggest players in real estate in Australia – and one of the first. We have influenced the skyline in many capital cities. We built the first skyscraper in Sydney – which we’re sitting in right now.

We manage around AUD $30 billion which puts us as one of the largest wholesale fund managers in the Asia Pacific. We have had tremendous growth in the last six or seven years, particularly offshore.

The really interesting thing is we have been growing our client base through that time. Historically, we used to manage a large proportion of AMP money. But now the majority of the money we manage is on behalf of external clients. We have just over 80 clients from all over the world – around 75 per cent are domestic, 25 per cent offshore.

Our focus in real estate is to deliver performance for our clients. We want to be the most trusted global real estate partner for our clients. Performance and trust go hand in hand.

You’re becoming increasingly global too?

Our business is divided into two components. One is separate accounts where we manage bespoke direct real estate solutions for around 10 clients, some of those we’ve had for a very long period of time and they’re trusted clients. And we have a pooled funds business. Since I’ve been here, we made the decision to take the business globally and have expanded into the US.

We thought if we want to expand the business, do we put a team on the ground and grow organically or do we acquire a specialist in that market? How do you attract the funds? How do you build trust with clients? We came to the realisation that with real estate, you have to be best in your market to be worthy of attracting the capital. So, we looked for a best-in-class partner in an area where we didn’t play so we could actually acquire a capability and learn a new way of doing things.

In late 2017, we acquired a 24.9 per cent interest in [a US-based debt and equity specialist] PCCP. They have been operating for 21 years in the US debt and equity markets based out of Los Angeles, San Francisco and New York. Culturally I see a lot of alignment to our business which is important. That business has grown significantly so now they are close to the USD $10 billion-mark funds under management as at the end of September 2019.

We also have a great shareholding partner there with CalSTRS and we have the founders and the employees who sit alongside us too.

Investment decisions are getting harder and harder to make – we cannot have people who think the same way all the time.”

How did real estate fare in 2019? How are you feeling about 2020?

Well, 2019 was a wild year – bond markets and equity markets rallied. For real estate, on balance it’s been another strong year in terms of returns. We continue to see real estate in Australia deliver, particularly as the hunt for yield creates a very competitive landscape for offshore investors.

Why Australia? Well from a relative yield and risk-adjusted return point of view, Australian real estate will remain very attractive during 2020. Australia is also seen as politically stable, has experienced an extended period of economic expansion and has one of the strongest population growth rates in the OECD.

With domestic players fairly full on their real estate allocations, the opportunity is there for offshore investors, who are particularly interested in logistics and well-located prime offices.

And what about retail?

There’s no doubt that retail has had its challenges which I think all retail owners in Australia are feeling. Given the dire state of the US retail market, people are looking to Australian retail and asking is this going to happen here?

The short answer is no. Certainly not to that extent. I strongly believe we are better placed than our global counterparts to manage the rapidly-changing retail landscape.

The reason is we have some distinguishing factors compared to the US and other global counterparts which will protect us, such as stronger population growth and better planning frameworks. This limits the potential for oversupply of retail space as experienced in markets such as the US.

There is clearly some sort of re-pricing going on in retail. It was always top of the pops – now you’re seeing that loosen off, and you’re seeing logistics and office become the most sought-after sectors.

Tell us more about the retail landscape.

Asset owners or landlords are now asking what the future shopping centre is going to look like. Quite simply, it will become more than just a shopping centre. The mixed-use and diversification opportunities could see residential, healthcare, lifestyle, aged-care and other amenities added to the mix – as well as the typical retail plus food and beverage offering. What are all the things that the community needs in that location to thrive? That’s what the shopping centre will look like.

I often question why it has taken so long. Well it’s probably because the pricing of pure retail has been so high that it was always the highest and best use.

That equation is definitely changing now and you’re going to see some really interesting things developing in retail assets.

Are you making that change already or is it in the future?

We are already re-positioning some of the shopping centres we manage and master planning across our entire retail portfolio. For some centres, such as Karrinyup in Western Australia, the transformation is well under way with residential apartments being added around the centre. We also have concept approval to build four mixed-use towers on Macquarie Centre [a shopping centre in Sydney’s second largest business district]. That will take us some time – we will do that over 10 to 15 years.

In the meantime, we continue to believe that shopping centres in highly sought-after locations will deliver the best investment outcomes for our clients, supported by an active management approach that retains and builds customers and engages with the community.

What else are you excited about?

Quay Quarter being built here in Sydney. It is amazing. It’s not often you get told at parties they like your facade! Quay Quarter Tower is one of Australia’s premium office developments in one of Australia’s most globally recognised locations at Circular Quay. As well as AMP, I’m really excited to have Deloitte moving their Sydney head office in there – they are going to be a great partner because they’re pushing us to the boundaries on technology and collaboration.

I’m also really proud at what we’ve been able to achieve through this development from a sustainability perspective. I couldn’t be prouder of the team working on this once in a lifetime project which will see us play our part, again, in transforming the Quay.

Turning to sustainability, how are ESG factors driving your investment decisions?

We really are focused on ESG – it’s one of our key strategic priorities. We carry a big environmental and social responsibility and we recognise that what we do will have a major impact.

We recently launched our 2030 Real Estate Sustainability strategy which includes a commitment to buying a piece of land the size of our entire portfolio to create a bio-diversity conservation reserve. I look forward to seeing what we can deliver in this space in 2020 and beyond.

Having reached this position, there’s a role that I can play to influence more inclusion in the industry. The property industry was always very male dominated. It’s seen a massive change in the last 20 years.”

Who’s leading the push for sustainability in real estate – investors or tenants?

It’s a bit of both. In the office sector, the industry is rated annually through the Global Real Estate Sustainability Benchmark (GRESB) survey. Pleasingly, we are very strongly rated. We can’t attract quality tenants unless we have certain sustainability and wellbeing ratings. The ability to achieve these ratings starts from the culture in your business – how you are pushing sustainability initiatives down to recycling within the assets you manage – which is business as usual for the real estate sector.

You’re also now Deputy Chancellor at your alma mater?

It’s a privilege. Western Sydney University has just under 50,000 students. I officiate at graduation ceremonies there. It is easy to forget how important these days are for these students. The range of different nationalities receiving their degrees – it is amazing to be a part of. For these families, going to university is such a leap forward in terms of their quality of life.

That focus on diversity is a big deal for you.

It’s a passion. Having reached this position, there’s a role that I can play to influence more inclusion in the industry. The property industry was always very male dominated. It’s seen a massive change in the last 20 years.

I’m chair of the Inclusion & Diversity Council for AMP Capital and a Special Advisor for the real estate industry for the Male Champions of Change [a high-profile group of CEOs and chairs driving gender equality in Australia]. I work with the other CEOs in the real estate industry to discuss how we can make change.

I also went to the United Nations in March last year for the Commission on the Status of Women. That was just 'blow your mind' stuff – 9,000 delegates from around the world connecting, collaborating and trying to come up with agreed principles and targets for the next year.

It actually made me realise we are in a really good position in Australia, although there’s a lot more work to be done. We need to play an active role as a leader for gender equality on the global stage.

And inclusion particularly matters in investing, right?

At AMP Capital, we understand inclusion is incredibly important. We need to be in a situation where people can bring their whole self to work and actually have the right debates and question each other in an environment of respect. Investment decisions are getting harder and harder to make – we cannot have people who think the same way all the time.

Training people to think like that and not be upset by the fact that you’re having a debate about something is not easy. But I think we’re definitely getting there, and as a result we will see sharper decision making which delivers better outcomes for our clients.

¹ As at December 31 2019