Ixom signs anew at 1 Nicholson

Chemicals company Ixom has signed a lease on three floors of 1 Nicholson Street, Melbourne’s first glass skyscraper.
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The 18-storey building’s landlord Charter Hall’s Direct Office Fund did the deal directly with Ixom, formerly the chemicals arm of mining services company Orica.

The tower in the north-east fringe office precinct, designed by Bates Smart, was built for ICI in 1960. That firm changed its name to Orica in 1998 and sold the chemicals business to Blackstone in 2015.

Head of Charter Hall Direct Steven Bennett said Ixom, which had previously sublet through Orica, now had a direct eight-year lease with the landlord on 2750 square metres in the building.

“They wanted security with their own long-term lease,” said Mr Bennett, who declined to reveal the rent terms.

“Once tenants have got into the building they don’t want to leave. We haven’t had any empty space available in the building since 2003,” he said.

But for the first time in 14 years Charter Hall has three floors at the top of the building available.

Mining services company Arup is moving in the fourth quarter of 2018 to Lend Lease’s $2 billion Melbourne Quarter project at Docklands.

“They’re moving because they’ve outgrown the space,” he said.

“From our point of view it’s a great time to be in the market and we think we’ll set a new benchmark. We’ve had good interest so far,” he said.

Recent research from Cushman & Wakefield indicates Melbourne prime rents have grown 8.7 per cent in the past year to an average $373 a square metre with incentives remaining stable at 30 per cent.

The building has recently had a substantial upgrade with $4 million spent on the lifts and a further $500,000 on end-of-trip facilities.

The Direct Office Fund (DOF) has a $1.025 billion portfolio of 10 buildings, with 75 per cent of its property in Sydney and Melbourne, with Brisbane and Perth making up the balance.

It is open to investors and returns 6.25 per cent a year in income.The unlisted property fund is making a concerted pitch for new investors and is now accessible through a range of investment and superannuation platforms.

The East Melbourne office precinct is very tightly held and has a vacancy level of about 1.5 per cent compared with Melbourne’s CBD vacancy of 6.4 per cent. The area is close to parklands and serviced by several tram routes and Parliament station.

A few doors down from 1 Nicholson, St Vincent’s Hospital has leased 837 square metres at 486 Albert Road.

The hospital will take out level one of the Catholic Archdiocese of Melbourne’s St Patrick’s Centre, formerly the VECCI building.

The deal was done by JLL leasing agent Richard Norman at between $350 and $370 per square metre net for five years.

The hospital is shifting its administrative team to make way for the St Vincent’s Hospital’s Aikenhead redevelopment project, a biomedical engineering research and education centre.

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McAfee rebranding creates pure-play cyber security company

Global cyber-security firm Intel Security has been renamed McAfee and now operates as an independent company, completing a split from Intel that was flagged in September.
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Intel continues to own 49 per cent of the new entity, which was valued at $US$4.2 billion ($5.5 billion). Private equity investors TPG and Thoma Bravo own the remaining 51 per cent.

Widely known for its antivirus software, US-based McAfee has more than 200 million customers and detects more than 400,000 new threats a day.

McAfee is installed on 300,000 devices across a range of n government agencies.

Corporate vice-president Brian Dye, who was in Canberra last week, said the spin-out delivered a pure-play cyber-security company with a strong focus on innovation.

Mr Dye said the separation involved back-end changes for McAfee, but for customers it was business as usual.

He described cyber security as “the most pressing technical issue of our time” and said the company’s strong focus was to automate protection.

“We have to free up the time of human beings because, until we do, this game won’t change,” he said.

“That’s why we want to be a stand-alone organisation, to bring the full force and focus to that problem.”

Mr Dye said McAfee would continue as a privately owned company but added there could be “opportunities in the future to go public or do a different strategic transaction”.

In news sure to disappoint founder John McAfee, who left the company in 1994, Mr Dye said a name change was considered but rejected.

In 2014 Mr McAfee said he was elated the business was being renamed Intel Security “freeing me from this terrible association with the worst software on the planet”.

Mr Dye said Mr McAfee had not been associated with the company for many years.”We looked at it very carefully,” he said.

“McAfee is a very well known and trusted brand. What we want to do is evolve a great brand, rather than spend a whole bunch of money on marketing.

“We’d rather spend our money on giving customers better security.”

Mr Dye said the company was striving for “day zero” protection.

“The vast majority of attacks are seen and have full fixes for them in two to four days after the original attack has happened,” he said.

“The challenge is how do we keep pushing day zero protection, something that no one has ever seen before.”

Mr Dye said this could be achieved through machine learning and building security on platforms.

“If we can engineer on a platform it’s easier for us to add new features and it’s easier for customers to adopt those new features,” he said.

“It doesn’t help us if we provide a great new technology that will solve today’s newest threat, and it takes customers 12 months to adopt it.

“In the speed of this market, and the speed with which attacks come and go and shift, customers have to be able to adopt things within weeks or months of when we produce them, not quarters or years.

“As you close one door the attackers try to open another one. It’s a never-ending cat-and-mouse game.”

Mr Dye said independent validation of McAfee’s strategy came from leading PC manufacturers, which ship the company’s antivirus software on new PCs.

“With machine-learning technology we take advantage of the fact we have hundreds of millions of users around the world on multiple platforms,” he said.

“We use the visibility from that to bake it into our learning algorithms and other updates that all our consumers get day in, day out without having any idea that it’s happening.

“We want them to explore safely and do their business safely when they need to without having to worry about cyber security.”

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China will hand Trump the win he badly needs, says Mobius

SYDNEY, AUSTRALIA – APRIL 03: Mark Mobius, Executive chairman of Templeton emerging markets on April 3, 2017 in Sydney, . (Photo by Ben Rushton/Fairfax Media) Photo: Ben RushtonDonald Trump needs a win “badly” this week when he meets Xi Jinping, and the Chinese President will be more than happy to give it to him, says Mark Mobius, the world’s best known investor in emerging markets.
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The New York-born Mobius joined Templeton 30 years ago as president of the asset manager’s emerging markets fund, but his experience back a further decade, gives him an unparalleled depth of knowledge when it comes to this dynamic, diverse and volatile corner of the investment world.

Mobius, whose title is executive chairman of Franklin Emerging Markets Group, has twin bases in Hong Kong and Singapore. But he says he doesn’t regard either as a “home” as much as a place to hang his hat when he’s not travelling, which he does a lot. The 80-year-old investor still spends as many as 260 days of the year on the road.

And from his on-the-ground experience in the region, he says the view from Asia on the new American leader is more pragmatic than in the West.

“As we travel around and talk to business people, very often Trump is not uppermost in their minds,” Mobius says. “I think most of these people are practical – they know that when a politician says something, particularly in the US, it means nothing unless it’s acted upon.

“One of the things they like about Trump is that he’s a dealmaker, and they feel comfortable with that. I think the Chinese feel that way as well. They think that ‘well we can hold our own and we’ll be able to negotiate a deal with this guy – he’s not dogmatic’.”

It’s in this context – Trump as a negotiator – that this week’s meeting between Jinping and his American counterpart is of particular significance.

“This meeting in Florida with Xi Jinping will be very, very important,” Mobius says. “It’s on everybody’s mind.”

Mobius believes the Chinese “have to come up with something that is positive for Trump”.

After the recent Congressional defeat of his healthcare legislation, Trump “needs success badly” from this week’s meeting between the two leaders. And Xi will be happy to give him one, Mobius says. What would a win for Trump look like?

“It would look like the Chinese saying that they are going to allow more American imports into China in certain categories, and it would also mean the Chinese would make investments in American manufacturing, in coal mining, in automobiles – things that Trump is talking about.

“And they’ll promise to hire more workers. From China’s point of view it’s peanuts; put a $1 billion in American manufacturing, what’s the big deal?

“I may be completely off base here, but that’s what I expect,” Mobius says.

Mobius points to the corporate “feelers”, which have already been put out. In January, Foxconn Technology Group’s chairman talked about a joint investment with Apple for a display-making facility in the US, although Apple has since apparently kiboshed the plan. Also in January, Alibaba boss Jack Ma said he would create 1 million new US jobs and help American companies export to China. What does China get?

“Peace,” Mobius says.

He points to the work of Michael Pillsbury, who he says is one of the policy voices to whom Trump listens, and in particular Pillsbury’s book, “The 100-year Marathon: China’s Secret Strategy to Replace America as the Global Superpower”.

“Pillsbury says the Chinese will not confront the US at this stage; they want a very peaceful, smooth international relations to allow them to build up their economy to the point where they surpass the US economy and then they say, ‘OK guys, we are in charge’.

“I think he’s right.”

The “sensitive areas” are around the South China Sea and North Korea, where Trump has recently threatened to “go it alone” to confront the pariah nation should the Chinese not help.

“But I think these issues are peripheral for Trump,” Mobius says. “The real issue is he wants to be re-elected, and if he doesn’t start delivering on his campaign promises he’s in trouble.”

Mobius thinks Trump would have experience dealing with Asian business people through his real estate deals and gambling operations. “You must remember that when you are running a casino you have a lot of Chinese customers,” he says.

He tells an anecdote of a wealthy Chinese businessman who bought an apartment in Trump Towers.

“He said that [Trump] would come around every month and invite him out for lunch or dinner to see if things were OK, so he got to know these people,” Mobius says. It’s also through this conversation that Mobius learnt that Trump tipped an amount equal to the bill.

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Six childcare centres up for grabs

A portfolio of six newly developed Victorian childcare centres offered to the market for the first time are expected to fetch $50 million.
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The centres scattered across Melbourne’s middle suburbs from Point Cook in the west to Ashwood in the east have been developed by Bamfa Properties and LR & EC Enterprises, property records show.

Key attributes of childcare centres – stable long-term leases arrangements underpinned by guaranteed government-supported fees – have made them an investment market darling and keenly sought after.

Most of the centres in Ashwood, Hughesdale, Blackburn North, Point Cook, Carnegie and Mentone have 20-year leases to ASX listed G8 Education, Guardian Early Learning and Nino Early Learning Adventures.

The rapid expansion of institutional players like Goodstart (formerly ABC Learning Centres), Folkestone Education Trust, G8, Arena REIT and Affinity Education Group has also fuelled investor interest in the sector.

Marketing agents Savills ‘s Julian Heatherich said there was a shortage of good investment stock and “nothing like this has been put to market” for some time.

Mr Heatherich said he expected the centres to be sold individually or as one line to institutional investors.

Finding sites in middle-ring suburbs to construct childcare centres was a “difficult” task, he said.

Yields for stand-alone centres have sharpened significantly with all Victorian centres sold since February 2016 achieving sub 6.5 per cent yields, and in several cases near 5 per cent.

A childcare centre in Sayers Road Tarneit sold for $3.7 million on a yield of 4.96 per cent in September last year. Another in Berwick sold three months later for $3.425 million on a yield of 5.44 per cent.

The most recent sale in Pakenham achieved $5.12 million with a yield of 6.24 per cent.

Department of Education and Training data shows an estimated 1.67 million children attended approved care in 2015???16 with about $7.3 billion spent by governments on childcare fee assistance.

The federal government recently pushed through legislative reforms for the Child Care Benefit and Child Care Rebate to replace them with one means-tested payment called the Child Care Subsidy.

Under the changes families earning less than $65,000 a year will get a subsidy up to 85 per cent of their costs. The rate for families earning more than that, but less than $340,000, will gradually taper to 20 per cent.

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Vita shares tumble on back of leaked Telstra document

A leaked internal Telstra document has revealed the telco giant is considering taking back control of some of its store network, potentially clashing with its major retail partner Vita Group.
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Vita shares tumbled on the news, closing 21 per cent down at $2.54.

Eleven of the identified stores are operated by listed company Vita Group, which is Telstra’s only Master Licensed Dealer and operates just over 100 of Telstra’s 350 stores around the country.

Vita released a statement to the market on Tuesday noting that conversations with Telstra are confidential.

“Telstra and Vita Group have enjoyed a strategic relationship for 22 years, presently governed by a Master License Agreement, which applies to all of Vita Group’s Telstra stores,” the company stated.

“The Master Licence Agreement has been extended a number of times, and currently extends to 2020.”

“The terms of the Master License Agreement are confidential and any significant changes to it are subject to mutual agreement.”

Internally,Telstra has identified 16 stores it believes would be more profitable if they were brought back into the Telstra Shop Network, because it would no longer have to pay sales commissions to licensees. It could take back control by not renewing the Telstra Dealership Agreement [TDA] with licensees, according to the document.

A Telstra spokesman said the document was only an “internal draft developed for discussion purposes”.

However, if Telstra goes ahead with these plans it would reduce by one tenth the number of Vita-operated Telstra stores.

This includes five stores in NSW – Macarthur Square, Tuggerah, Hornsby, Rouse Hill and Erina Fair – three in Western , Rockingham, Success and Midland Gate, and Queensland’s Chermside and Northlakes stores, and the Werribee dealership in Victoria.

“There are 16 identified stores to buy back which meet the ‘no regrets’ criteria,” the leaked document states. The ‘no-regrets’ criteria include being located in a major metropolitan shopping centre, if the regional director approves of the move, and if the store is likely to have a positive operating cash flow if it is part of the Telstra Shop Network rather than paying commissions to a dealer.

Telstra spokesman Steve Carey said “the document in question is an internal draft developed for discussion purposes only”.

“It does not reflect the viability of any of the stores listed, and no decisions can be taken on individual Vita sites due to the nature of the agreement,” he said.

“There are no current plans to amend our arrangement with the Vita Group. All conversations with Vita and individual licensees are confidential.”

He added Telstra regularly reviews its store footprint and licensee arrangements.

“The agreement we have in place with all our licensees clearly states when changes can be made and the process we must follow,” Mr Carey said.

The document noted the TDA non-renewal is underway at the independent dealership at Fountain Gate, believed to be the dealership on level two of the Westfield shopping centre.

The remaining four stores are independent dealerships in Robina, Qld; Joondalup, WA; and two in the Westfield mall in Carindale, Qld. iFrameResize({enablePublicMethods : true, heightCalculationMethod : “lowestElement”,resizedCallback : function(messageData){}, checkOrigin: false},”#pez_iframeA”);

In November 2016 Vita Group’s share price dropped 13 per cent in one day, from $4.71 to $4.09, on rumours Telstra was trying to cut dealer commissions in the latest round of negotiations. At its half year results Vita announced a 19 per cent increase in earnings but warned there will be “some softening of profitability” because a new remuneration structure has been introduced.

Vita operates stores for Telstra, FoneZone, One Zero Communications, and Sprout and recently launched SQDAthletica. It earns money from selling products and also receives commissions whenever customers sign up to a plan.

At an analyst briefing in November, Vita’s chief executive, Maxine Horne, who owns nearly 17 per cent of Vita shares, said Vita’s agreement with Telstra covereds all stores and expires in August 2020. She was asked if Kevin Russell’s appointment as Telstra’s group executive retail meant the telco would corporatise its store network, as Mr Russell had done at Optus.

She replied that there “hasn’t been any discussion and my response to that [is] it’s highly unlikely”.

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