“From that perspective, for investors like ourselves, it gives us the opportunity to invest at improved pricing.”
There are strong signals already for the direct property market coming from listed real estate investment trusts, which have given up about 25 per cent, and bond yields are nudging 4 per cent.
“Everyone is taking a bit of a step back and thinking ‘OK, what is the look ahead for the market?’” Ms McNally said.
“Most people are being cautious. We are already seeing that bit of a drift out in yields and repricing. Investors, like ourselves, will need to think carefully about where the growth is going to come from out of the portfolio in terms of rentals.”
The new platform already has a $1.5 billion property portfolio of industrial, office and residential assets across Australia. A big feature of Aware’s property book is its build-to-rent developments – including essential worker affordable housing – in Sydney, Melbourne, Perth and Canberra. Logistics assets in Sydney’s west, such as the First Estate industrial park in Erskine Park, feature heavily too.
A refreshed strategy for the platform will be hammered out over the next few months by Ms McNally and her team.
Aware Real Estate is being set up in partnership with Altis Property Partners, which has worked with the superannuation fund for more than a decade, tracking down and developing projects.
Aware’s newly minted local platform parallels similar ventures in offshore markets where the super fund has invested, including partnering with Dutch pension fund APG on a serviced apartment enterprise in Europe and on a multi-family platform in Spain.
The super fund has close to a half stake in Lendlease’s $2 billion retirement village portfolio. It has invested in a number of Lendlease’s urban regeneration projects in the US which are delivering BTR housing: in Chicago, Boston, New York and Los Angeles.
Overall, about 16 to 18 per cent of Aware’s $155 billion portfolio is allocated to real assets, with roughly half of that in real estate.
That pool of funds could rise to $250 billion by 2025, by which time Aware hopes as much as half will be run in-house, according to Damien Webb, Aware’s deputy chief investment officer and head of real assets.
“For us to control the portfolio and control competitive fees, it’s imperative that we continue with our journey towards internalising management of a large portion of portfolio.
“That is across the board: from listed equities, through to infrastructure and property as well as cash and credit.”
Mr Webb also sees volatility in markets as an opportunity as much as a challenge.
“Right now it is going to be a more difficult market for investing than it has been in the last five to 10 years where it’s been pretty much a flow of cheap money. Now it will be discerning and high-quality sponsors like ourselves will be able to take opportunities as they are presented in the marketplace.”
Aware Super sets up local property platform - The Australian Financial Review
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