Super funds look to boost exposure to offshore real estate
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.
Frequently Asked Questions about this Article…
According to a Jones Lang LaSalle report, Australian super funds are seeking overseas real estate because the domestic market can’t provide enough high-quality opportunities to absorb the growing pool of capital. With compulsory contributions rising, funds are looking offshore to find the scale and yield they need.
The article says more than $80 billion is expected to head offshore over the next six years, and about 10–12% of that outflow would be earmarked for commercial real estate, including managed property securities and direct investments in malls, offices and warehouses.
The report notes Australia’s compulsory superannuation system is, by some measures, the fourth-largest asset pool globally, with around $1.4 trillion in assets under management and roughly 10% currently allocated to real estate.
The article states that compulsory contributions are set to rise to 12% of salary by 2020, which will increase the amount of capital available for investment. Jones Lang LaSalle estimates that this rising pool of capital will boost demand for international real estate and could cause demand for direct real estate to outstrip domestic supply.
Super funds are targeting commercial real estate via managed real estate investment trusts (property securities) and direct investments in asset types such as malls, offices and warehouses, according to the article.
RRE Global Property Securities is a joint-venture fund set up through Channel Capital by Australian property executives John Snowden and Scott Crowe. The venture will offer global property securities to institutions and investors, with Snowden operating in Sydney and Crowe in New York.
Channel Capital will provide the funds-management infrastructure to underpin the Australian investment offering, enabling the joint venture to manage and distribute global property securities to institutional and retail investors in Australia.
The pair previously worked together at UBS. Scott Crowe later became lead manager at Cohen & Steers in New York, while John Snowden was global portfolio manager at Colonial First State, managing specialist property funds across Australasia, London, Dublin, Hong Kong, Singapore and Japan.
Call 1300 880 160
Start a chat
Schedule a call
