- Mr Lo Surdo's entry into property finance was somewhat accidental, after discovering a love for the tangibility of real estate investments
- Since beginning his career he has noted a fundamental shift in assets, trending towards industrial and capital markets
- Forecasts an interest rate rise mid-year which may change the real estate landscape, and encourages budding investors to form relationships with professionals in the industry
In the latest chapter of our Real Story series, The Property Tribune spoke to Stamford Capital’s Joint Managing Director Domenic Lo Surdo to gain insight into the intricate world of property finance.
Kick-starting his career in financial markets within ANZ’s Institutional Property Group more than 20 years ago, Mr Lo Surdo has a wealth of knowledge in property investment and finance.
In 2011, Mr Lo Surdo launched Sydney-based funds management firm Stamford Capital with a vision to provide investors with secure risk-adjusted returns in commercial real estate.
A love for the tangibility of property finance
Mr Lo Surdo’s career pathway into the property finance industry could be characterised as a happy accident.
Having obtained a Bachelor of Commerce in Accounting and Finance from the University of New South Wales, he quickly discovered accounting was not where his passion lies.
“I had started working in accounting for a little while and realised that accounting wasn’t the career I wanted to pursue, and having studied both accounting and a finance major, thought I would try something in finance and ended up actually getting a job with ANZ at the time in their commercial real estate group,” he explained.
Mr Lo Surdo admits that he had little exposure to the world of real estate at the time but became swiftly enamoured with property finance.
“I fell in love with it pretty quickly to be honest. I liked the people and I liked the variety of clients, and very much liked the asset class.”
In comparison to other aspects of finance, the tangibility of real estate was what drew Mr Lo Surdo in.
“It was actual tangible results. I like the fact that you could actually touch and feel assets and see assets being built to the extent that you are financing those assets,” he added.
A fundamental evolution in financial markets
That passion for property finance has since grown, translating into the establishment of his own investment management firm, Stamford Capital.
Looking back on his time in the industry, Mr Lo Surdo remarked that the commercial real estate market has rapidly grown in sophistication, particularly in the level of professionalisation.
“The thing that I have found quite remarkable about the real estate industry is how resilient it is and even in times of tumult, new businesses start to take advantage of stress in market, people spin out of other organisations and start their own businesses which develop or acquire commercial real estate assets.”
He also noted a fundamental shift in the popularity of asset classes, particularly with the once neglected industrial market soaring in recent times.
“The industrial asset class was so unloved by sponsors and capital alike given it was historically a single-tenant exposure, unlike a retail asset or a commercial office asset.
“Industrial assets can’t be any hotter than what they are now, its extraordinary what yields these assets are trading on.”
The office market has also undergone a major reshaping within the last half-century, most recently as businesses navigate the ‘work from anywhere’ movement and how to foster company culture remotely.
Mr Lo Surdo is optimistic company culture will once again find its feet in the new world and said, “as a business owner I’m certainly supportive of that view, I think its really important that people are able to connect in a sense of place.”
Mr Lo Surdo believes however, that the real evolution has happened in the capital market.
When he first began his career, banks were the only option for capital financing whereas the non-banking sector has now evolved dramatically, particularly post-GFC.
“The Australian market is quite small in global terms, but it’s very sophisticated and so it will move and change at pace, arguably ahead of other markets as challenges present themselves. There’s no doubt that the Australian market has some really smart people in it and depths of capital and a demand from capital investors offshore to deploy capital here, and with that comes the ability to reinvent and develop new products.”
2022 market forecast
As for the trends in the Australian market Mr Lo Surdo expects to see in the near future, he believes industrial assets will continue to be well supported, despite foreseeing an interest rate rise in mid-2022.
“Real estate historically has been viewed as a hedge against inflation. I think that is true when you’ve got demand… I question whether that logic is consistent in the office markets where you’ve got this potential risk where inflation is rising, interest rates are rising and tenant demand is soft and potentially going backwards,” he explained.
He also expects a possible interest rate rise to soften the residential market slightly, which he described as having an “unbelievable run” as of late, though he anticipates demand to grow and supply to remain tight.
As concerns for a black swan event brought about by political tensions in Europe continue to plague minds, Mr Lo Surdo says Stamford Capital are feeling a natural sense of caution in their investments.
“For now we are business as usual. We think whilst rates will go up they’re not going to 9 or 10%. I think they will level out at somewhere between 2 or 3% cash rate in the medium term.
“I don’t think its catastrophic,” he added.
Advice for budding investors
For those seeking to enter the investment space, Mr Lo Surdo accentuated the importance of understanding the current financial markets.
“I think you really need to understand asset classes that you are investing in deeply, and that includes location as well as asset type, and who the tenants are that can potentially occupy the building that you’re looking to acquire.”
He said that unlike residential markets, tenants for commercial markets are harder to come by, adding more pressure on income streams when the market tightens up.
“I would certainly encourage people to get to know commercial real estate agents and actually form a relationship with them because they are in and out of assets and markets all the time.”
He added that a hallmark of a great commercial agent is a willingness to create relationships, and said this is a great way to receive advice and guidance.
As for the capital side of things, he encourages people to speak to businesses like Stamford Capital, who specialise in guiding investors towards achieving their investment goals.
“Investors should make concerted efforts to understand what is available in the market in terms of credit and alternative capital for any asset that they’re looking to acquire,” he concluded.
