The $33 billion REST Industry Super fund will invest about $350 million in a joint venture with a major US developer, Greystar Real Estate Partners.
REST’s partnership with South Carolina-based Greystar comes as Australian super funds are increasingly looking offshore for real estate investments including AustralianSuper, Hesta, Queensland Investment Corporation and QSuper.
Under the 10-year deal, REST will be the majority equity partner on about eight new rental apartment buildings with a combined total of about 3000 apartments that will be developed and managed by Greystar.
Greystar is the largest manager of apartments in the US, overseeing about 385,000 units.
It also has an investment management platform with more than $9.5bn in assets under management, including $2.7bn of developments currently under way.
REST chief executive Damian Hill said the venture would target growth markets across America.
He told The Australian the group was looking for uncorrelated returns and to shift into new fields. “This is an asset class we can’t get in Australia,” he said.
Mr Hill said the choice of eight cities had been driven by those with growth industries, including energy, technology, and biotechnology.
“Planning and construction of the first residential property under the agreement is expected to start shortly in Austin, Texas,” Mr Hill said.
“We expect at least four other developments to be under way by this time next year.”
He said multi-family groups were targeting younger people who were forgoing home ownership in favour of renting in inner urban locations.
Mr Hill stressed the high degree of control that REST retained, as it would look at each of the deals Greystar put forward in the nominated cities and would deploy capital into individual projects.
The equity investment is expected to be about $25m-$30m per site and the complexes could have several hundred units.
REST, which has developed an internal property capacity, was assisted by asset consultants JANA and Mercer, and fund executives have also spent time in the US. “We’re certainly not restricted to Australia in looking for property,” he said.
“In order to produce stable investment returns we’ve got to look far and wide. It’s really a top-down approach.
“We look at the Australian property market and there is a lot of money competing here,” he added, saying that REST looked for investment opportunities that were most attractive when long-term volatility across different asset classes was taken into account.
Mr Hill played down concerns about the volatile US housing markets, saying construction had fallen significantly since the global financial crisis.
This article first appeared in The Australian Business Review.