Established in 2004, Resolution Capital Limited is a specialist global listed real assets securities manager with a successful long-term investment track record dating back to 1995 and ardent culture of fiduciary responsibility. The firm is majority employee owned and headquartered in Sydney, Australia, and has an office in New York, US.

Resolution Capital believes that listed real assets is an excellent means of gaining exposure to the underlying returns of some of the world’s highest quality real estate and infrastructure assets in a simple, transparent, liquid and tax efficient form.

Resolution Capital is a fundamental investment manager with the objective of delivering superior risk-adjusted long-term returns, compared with recognised industry benchmarks. This is achieved through investment in a concentrated portfolio of carefully selected listed real estate and infrastructure securities with an emphasis on avoiding fundamental flaws which could reasonably result in permanent impairment of the underlying investments. This aligns our investment process and security selection with clients’ objectives of long-term real wealth creation.

Resolution Capital’s investment philosophy is based on three fundamental components – focus on real estate quality with defensible cash flows, focus on conservative capital structures to protect our clients from the permanent impairment of their capital, and focus on corporate stewardship of investee companies. These three core principles foster an investment approach which leads to investment portfolios that possess visible, recurring cash flows, conservative capital structures and which are operated by experienced, capable and aligned management teams.

Our investment philosophy is focused on ‘best in class’ companies and environmental, social and governance (ESG) considerations are an integral part of the Resolution Capital investment philosophy. We believe ESG initiatives benefit the broader community and that strong ESG practices of the companies in which we invest are likely to be additive to their performance and lead to investors ultimately being rewarded through superior investment outcomes.

The team is well resourced for the effective management of portfolios within the strategy with four portfolio managers supported by four investment analysts in addition to the internal trading, quant, ESG, operations and client services teams.

Resolution Capital manages discrete (separate) accounts and pooled funds for wholesale and retail clients. Our clients are predominantly institutional clients, pension funds, investment platforms, financial advisers and their clients worldwide.

Sector forecasts

Focussing on the US only, the Global REITs team holds strong conviction in several US sectors: data centres, healthcare, shopping centres and residential.

INDUSTRIAL: Letting the hot air out. The supply/demand imbalance continues with elevated construction deliveries and moderating tenant demand that is normalising following an unprecedented growth during the pandemic, thus leading to decelerating rent growth and rising vacancy rates. However, listed industrial REIT in-place rents continue to be substantially below market rates which is still leading to strong positive reversions upon lease expiry.

OFFICE: Frail fundamentals. Tenant demand has increased but still trending below pre-pandemic levels in most markets, attributed to business cautiousness and tenant downsizings/hybrid work. Rising vacancy rates have exerted downward pressure on effective rents. Listed office REITs are trading at discounted valuations, and own newer/higher quality portfolios which are market share winners in leasing, benefitting from the ‘flight to quality’ thematic.

RESIDENTIAL: An unprecedented affordability gap. Higher interest rates and resilient house prices have pushed the relative affordability gap between renting and homeownership to unprecedented levels, favouring landlords. Single family and manufactured housing fundamentals are relatively more favourable vs apartments given elevated supply for the latter.

RETAIL: Bricks remain the bedrock. Strip centre REITs remain attractively priced at discounts to intrinsic values and replacement cost, amidst favourable fundamentals. Portfolios have been endorsed as last-mile real estate. Store closures remain at a decade low, with positive net absorption and historically low vacancy rates occurring amidst minimal supply additions.

DATA CENTRES: Still in the clouds. Poised to capitalise on robust structural demand growth fuelled by the digital transformation. Leasing activity has surged to record levels and rent growth remains strong. Cloud adoption should remain a significant medium-term demand driver, with artificial intelligence being a longer-term driver. While supply growth is elevated, much is pre-leased.

HEALTHCARE: Surfing the grey wave. Seniors housing comprises a sizeable portion of healthcare portfolios in which we are invested. The segment is expected to continue to benefit from occupancy recovery and an improvement in operating margins, further bolstered by the ageing population. Meanwhile, rents remain affordable due to surging household net worth over the past decade and supply growth remains well below historical levels.

HOTELS: Moderating demand. Following the surge in demand during the post-COVID reopening, income growth is moderating and expected to stabilise around low-single digits, assuming no material deterioration in economic conditions.

Investment principles & strategy

Resolution Capital invests in a select group of real estate and infrastructure securities capable of generating superior risk adjusted returns for investors. We are intent on identifying and avoiding factors in our stock selection which could reasonably result in permanent capital impairment of the underlying investments.

Primarily through bottom-up research, Resolution Capital seeks to identify and invest in a select group of high-quality stocks which afford unique characteristics that the market continues to underappreciate. The team adopts a concentrated portfolio construction approach that invests in a select number of securities in its portfolios.

The bottom-up analysis undertaken by the investment team is reviewed in conjunction with the identification of ‘top down’, broader investment and direct real estate and infrastructure specific themes. Supporting the bottomup philosophy is the division of research responsibilities amongst the investment team by sector, rather than region.

The investment team members are specialists in their respective sectors, having travelled widely and been exposed to world best practices. They are uniquely equipped to evaluate companies and their management teams against global peers. By adopting this philosophy, Resolution Capital believes it can create portfolios which have the greatest prospect of delivering returns above inflation and consistent, sustainable, long-term outperformance.

Strategic corporate development

The firm has experienced strong growth in its global property securities strategy in the last few years and this strategy accounts for the majority of firm assets under management. In addition, the firm launched a global listed infrastructure capability in 2021 which has now reached its three-year track record.

Resolution Capital is seeing increased demand for its strategies from offshore clients (outside of Australia and New Zealand) and offshore clients account for approximately 45% of the firm’s assets under management. Resolution Capital’s growing pool of institutional clients are spread globally in the UK, Europe, US, Canada, South Africa, the Middle East, Asia, Australia and New Zealand.

Performance verification

Resolution Capital claims compliance with the Global Investment Performance Standards (GIPS®). Resolution Capital has been independently verified by ACA Group for the period between 1 January 2007 and 31 December 2023.

COMPLIANCE STATEMENT

Resolution Capital believes the information contained in this material is reliable, however, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. Any opinions and forecasts reflect the judgment and assumptions of Resolution Capital and its representatives based on information available as at the date of publication and may later change without notice. To the extent permitted by law, Resolution Capital disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information.