Di Pilla plots to double funds under management to $20b
Shares in alternative asset manager HMC Capital surged almost 10 per cent as the David Di Pilla-led platform set out a diversification push into wind farms, data centres and telco towers that will help double funds under management to $20 billion over the next few years.
The strategy could also deliver a more than 20 per cent return on equity.
The expansion into renewable energy and digital infrastructure as well as HMC’s first overseas acquisition were unveiled as the fund manager delivered half-year earnings of $57.8 million, or 16.6¢ per share – 18 per cent above analysts’ consensus forecasts – and provided full-year earnings guidance for the first time.
Forecasts of operating earnings of 33¢ per security for the full financial year represented a 25 per cent increase on the 26.4¢ delivered over the previous financial year
“We have a profitable underlying business, with a strong outlook for the second half of the year, and we have a clear vision and road map to go from $10 billion to $20 billion [of funds under management] over the medium term,” Mr Di Pilla told The Australian Financial Review.
Shares in real estate investment trust closed up 9.6 per cent at $6.86.
This road map includes the launch of a new energy transition division and a move into digital infrastructure through the acquisition of a North American development platform called StratCap for $US28.5 million ($43.6 million).
‘Opportunity rich’
Both diversification initiatives follow HMC’s investment thesis around investing in assets and businesses underpinned by global megatrends: in the case of energy transition and digital infrastructure these megatrends are global decarbonisation and the growth of artificial intelligence.
“The [renewable] energy market is complex and opportunity rich. We will not do what others do and undertake low-returning sale-and-leaseback of wind farms and solar farms,” Mr Di Pilla said.
Instead, he said the focus would be on complex, large-scale opportunities that were mispriced and utility scale in nature.
“Decarbonisation is one of the most significant [investment] opportunities of a generation,” Mr Di Pilla said.
Leading this new division will be the former UBS energy and utilities head and senior QIC infrastructure dealmaker Angela Karl.
Asked if the push into digital infrastructure included buying data centres, Mr Di Pilla said “absolutely”.
“Owning data centres is front and centre of our digital infrastructure strategy,” he said.
The immediate focus, he said, would be on delivering StratCap’s $1 billion development pipeline including hyperscale data centre developments.
Though StratCap’s current focus is on the North American market, Mr Di Pilla said it had a global data centre development capability that HMC planned to utilise to drive growth.
Alongside these new diversification plays, HMC Capital is accelerating its plans to secure seed assets for a global healthcare fund that Mr Di Pilla flagged in November. A move into non-bank lending is also being explored.
Mr Di Pilla previously likened HMC’s diversification efforts to creating a “mini-Blackstone” while alternative asset management giants Macquarie and Brookfield are two other platforms the fund manager “admires”.
New growth initiatives
Formerly known as Home Consortium, the $10 billion HMC platform includes two listed real estate investment trusts, convenience mall owner HomeCo Daily Needs REIT and the Healthco Healthcare & Wellness REIT. It also has a private equity arm with stakes in Sigma Healthcare, Ingenia and Lendlease, and two unlisted funds.
Over the half-year, funds under management rose 37 per cent to $8.5 billion and to more than $10 billion (a major growth target) when including the value of HMC’s development pipeline and new growth initiatives.
Driving this expansion was the bedding down of the $1.2 billion Healthscope hospital portfolio deal.
The value of its stake in Sigma Healthcare surged following the $8.8 billion reserve takeover by Chemist Warehouse that will lead to the retail pharmacy group hitting the Australian stock exchange at the end of the month.
As part of a new growth initiatives, a new capital solutions platform to manage “strategic balance sheet investments” will be led by Mr Di Pilla’s former UBS banking colleague Robbie Vanderzeil, who joined HMC Capital as an adviser last July.
With a strategic stake in Lendlease through its HMC Capitals Partners Fund 1, Mr Di Pilla backed the restructuring efforts under way at the developer, whose share price fell 15 per cent on Monday after it reported a 42 per cent slump in interim profit.
“We gave them a white paper last year, which had a constructive plan for the future of the business. We are pleased they have executed on this to sell their residential communities business [to Stockland] at premium to book value.
“The continued divestment of low returning non-core activities is sensible. We’d like to see Lendlease evolve into a high return on equity development business of global quality over time,” he said.
