REAL ESTATE - Australian institutional investors are scouting real estate investment opportunities in Europe because they have significantly outgrown their own domestic market.
Queensland Investment Corporation, which manages the Queensland public pension fund, said last week it had AUS$2.5bn (€1.48bn) to invest in real estate in the US, Europe and Asia. The pension fund – Australia’s fourth largest institutional investor – plans to open offices in London and the US in the near future.
Largely because of a compulsory 9% contribution from employers, the Australian pension fund industry is large and sophisticated. Yet the country has a small real estate market – with 2% of the global total – most of which institutions already own. Listed property trusts (LPTs) – the Australian equivalent of REITs – have proved popular among Australian pension funds, which outside their own market have up to now focused on high-yield investments in the US.
AMP Capital, the Australian fund manager, forecasts that demand for property in the country will grow at 8% annually, against supply growing at 3%.
The fund manager last week struck a deal with Cordea Savills, which will run the European portfolio of its AMP Capital Direct Property Fund, aimed at Australian and overseas pension funds. The fund is invested 40% in Europe, 40% in the US, and 20% in Asia.
Cordea Savills CEO Justin O’Connor indicated that the company might pursue other, similar deals in future. He said of the deal: “It’s a very good source of capital in markets we have no intention of entering ourselves.”
He said he expected the European portfolio to grow to €500m within four years.