Super funds look to boost exposure to offshore real estate
Superannuation funds - with an increased appetite in the billions of dollars for high-quality, higher-yielding investments - are looking for real estate assets overseas.
More than $80 billion is said to be heading overseas in the next six years, of which about 10-12 per cent would be allocated to commercial real estate, in managed real estate investment trusts and direct malls, offices and warehouses.
The outflow mirrors the early 2000s trend in which the Australian market was considered too small to accommodate the pool of capital that was looking to invest in real estate. To satisfy the superfunds, many headed into overseas-based funds and property, and with mixed success. According to the latest report by Jones Lang LaSalle's International Capital Group, because of the compulsory contributions system, Australia's superannuation system is, by some measures, the fourth-largest asset pool in the world, with real estate accounting for about 10 per cent of its current $1.4 trillion assets under management.
The report says those contributions are set to gradually increase to reach 12 per cent of an individual's salary by 2020, significantly increasing the amount of capital available for investment in international real estate markets. The head of capital markets at Jones Lang LaSalle, John Talbot, said that between now and 2020 the estimated demand for direct real estate from super funds would outstrip domestic supply.
"With the domestic market unable to offer sufficient opportunities to provide the real estate exposure sought by the funds, international real estate markets are set to benefit," Mr Talbot said.
To capitalise on the growth, two Australian real estate stalwarts, John Snowden and Scott Crowe, have formed a joint venture through a funds management firm, Channel Capital, aimed at institutions and people wanting to invest in offshore and local stocks. The venture, known as RRE Global Property Securities, will offer global property securities investment from Mr Snowden in Sydney and Mr Crowe in New York.
Channel will provide the funds management infrastructure to underpin the Australian investment offer.
The directors worked together at UBS, before Mr Crowe headed to New York as lead manager at Cohen & Steers, and Mr Snowden joined Colonial First State as the global portfolio manager, managing specialist property funds in Australasia, London, Dublin, Hong Kong, Singapore and Japan.
Mr Snowden said the fund would focus on growth regions.