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Quintessential Equity’s Quinn sets up ground lease fund

BEN WILMOT
THE AUSTRALIAN

17 MARCH 2016

Quintessential Equity’s Shane Quinn sees security in ground leases. Picture: Aaron Francis

Engineer Shane Quinn does not shy away from a challenge. A renowned innovator in green buildings and, more recently in accessible property, he was set a task by a Melbourne-based billionaire family.

Mr Quinn, told to come up with a “bulletproof” concept as the family looked to redeploy capital after a successful investment, was initially stumped.

But his answer was surprisingly simple — a ground lease fund.

The group he co-founded, Quintessential Equity, has acted fast on the idea, putting its foot on properties nationwide for the forthcoming trust.

It is quietly buying a landmark portfolio across several capital cities. Mr Quinn won’t identify assets but said they are among the best located in the country.

“We’ve got $100 million in cash at the moment to do our first deals,” he said. And he’s pursuing more opportunities as companies and state governments look to offload the low-returning, albeit valuable assets. “We would be all over buying those ground leases,” Mr Quinn said of a round of government sales expected later this year in Sydney.

While a novel concept in the local sphere, ground leases have been held for centuries by Europe’s great families as a last bastion of wealth protection.

“It’s a well-established market in the intergenerational wealth markets in the US and Europe,” Mr Quinn said.

He sees the potential to replicate the structures locally.

Quintessential’s Ground Lease Fund will operate at several levels. It could buy a property and then keep the land, while selling the improvements to a third party investor after a higher yield.

Alternatively, an owner may elect to keep the improvements by taking a long-term lease stretching to 99 years. The property would revert to Quintessential at the end of the term, but the holder of the improvements would reap far greater income returns.

Quintessential is targeting properties with a focus on city office towers and suburban shopping centres, as well as hotels. It will seek more support outside the Melbourne family and its investment partners.

The returns are below those normally generated by commercial property. But under the ­concept, attendant risks are all but removed, and worries about short-term overheating are displaced.

Quintessential’s innovation could be lasting with Mr Quinn seeing potential for the asset class to become a permanent feature of the market.

“Australia has such an amazing amount of prosperity over the last 40 years so there is true intergenerational wealth,” he said.

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