The nation’s largest superannuation fund, AustralianSuper, has appointed US giant Principal Real Estate Investors to hunt for office towers in five east and west coast cities as it moves aggressively build a $10 billion property portfolio by 2016.
“We’ve been tracking the US market for an extended period of time and we see good long-term opportunities in select markets to continue to build our international property portfolio,” said AustralianSuper head of property Jack McGougan.
AussieSuper is among a clutch of Australian superannuation giants pushing into offshore real estate, with others including QSuper, Queensland Investment Corporation, REST and Hesta.
AustralianSuper, which manages just over $80bn worth of funds, controls $6.13bn of real estate investments.
The company said it was on track to meet its direct property investment target.
AussieSuper has appointed Principal its adviser for US office investment and tasked it with buying $200 million-plus office buildings in New York, Washington DC, Boston, Los Angeles and San Francisco.
The super fund has awarded three other property investment mandates over the past two years. The first, in May last year, was to Melbourne-based ISPT for retail and office assets in Australia. Offshore Henderson Global Investors won a mandate for shopping centres in Britain while Brisbane-based QIC was appointed to scout for prime shopping centres in the US. In March, Mr McGougan told The Australian that about 7 per cent of AussieSuper’s property portfolio was located offshore and this was expected to increase to 20 per cent over a five-year period.
At that time, Mr McGougan said it was not time to buy US office space, although he flagged an expansion “once the cycle turns”.
Grant Forster, chief executive of Principal Global Investors Australia, said pension funds were all focused on income-producing assets and were keen to diversify their investments.
“This will be part of a long-term strategy (for AussieSuper), and we have been speaking to them for a long time now, over a period of years, and building up trust about how we work,” he said.
Principal manages $54.3bn in commercial real estate assets. There are no targets for the end value of assets in the new US office investments. AussieSuper already has interests in a number of significant office assets, nearly all in Australia. The super fund has stakes in 363 George Street in Sydney, as well as 100 St Georges Street in Perth and Casselden Place on Lonsdale Street, Melbourne.
The fund only began its overseas push late last year, with local assets becoming more expensive and difficult to find. Last Christmas it took a half stake in a major regional shopping centre, the centre:mk in Milton Keynes northwest of London, for £270m.
This article first appeared in The Australian Business Review.