Aware Real Estate bulks up pipeline of industrial, living sector projects
Aware Real Estate, the property investment platform of superannuation giant Aware Super, is making significant inroads into Australia's industrial property sector, with CEO Michelle McNally at the helm of an ambitious expansion strategy.
Established in 2021, the company acquired the Austrak Business Park in Melbourne for approximately A$600 million ($408 million) earlier this month. The deal underscores its commitment to the industrial and logistics space.
Aware Real Estate
The purchase was made in partnership with asset manager Barings, which played a significant role in establishing Aware Real Estate's portfolio, according to the property firm.
With assets under management (AUM) approaching A$3 billion following its latest acquisition, Aware Real Estate is well on its way to achieving its five-year target of A$7 billion in assets.
This growth trajectory is largely attributed to the company's focus on key sectors, said McNally.
"We have a large development pipeline predominantly in the living and industrial sectors," McNally told AsianInvestor.
"Those are the two key areas we have been continuing to invest in, and that's influenced our growth and will continue to do so."
The company's portfolio composition has proven advantageous in recent market conditions.
"We're fortunate that our portfolio hasn't included sectors struggling from a demand perspective, particularly the office sector, over the last two years. Performance has been underpinned by strong growth in the industrial sector. Even though yields have softened in that sector, we've had good market rental growth to balance that out."
TERMINAL PROJECT
Austrak Business Park, a 99-hectare industrial estate to Melbourne's north, is set to play a crucial role in the company's portfolio.
"This investment ticks a lot of boxes for us. In terms of our overall strategy, we're looking for exposure to larger business parks where we can offer quality and amenity to occupiers," said McNally.
Notably, the park will be home to a A$400 million terminal project backed by Aware Super, the upcoming Somerton Intermodal Terminal. The project is aimed at enhancing logistics capabilities in the region and further solidifying the strategic importance of the park.
"Access to the intermodal on the estate and its linkages to both the port and interstate rail is a significant draw for occupiers," McNally said. "Rail provides efficient access from ports through the intermodal, allows users to reduce carbon emissions, can be more cost-effective under certain conditions, and helps with road decongestion.”
McNally highlighted the advantages of the pre-existing infrastructure as it relates to the task of developing the site.
"What we like about the development is that the land is already subdivided, zoned, and serviced," she noted. "We can bring on the development quite quickly without layers of planning challenges. This enables us to bring it online faster, which will boost returns."
Aware Real Estate also has ambitious plans to enhance the business park's offerings.
"We'll also focus on enhancing amenities, landscaping, creating spaces for people, and adding retail," she stated. "We'll look at utilising the significant road frontages to bring life to the park's edges, possibly through higher and better uses in those locations."
"The existing assets are high quality, and we're looking to add to those through the development pipeline," she said. "The estate gives us the opportunity to bring the ownership together under 100% ownership, allowing us to execute a well-thought-out strategy with great alignment."
This comprehensive approach could ensure that the park is brought to market in a way that is institutionalised and meets the demands of occupiers, she added.
CHALLENGES AND OPPORTUNITIES
Aware Real Estate's approach to the industrial and logistics sector is characterised by breadth and adaptability, encompassing a wide range of assets from un-zoned development sites to existing, stabilised properties.
Having this flexibility has proven crucial in navigating recent market challenges, according to McNally.
"Over the last 12-18 months, we've seen challenges with increased construction costs and planning delays. We've been more strategic in pursuing build-to-core in this environment, looking more at existing assets,” she explained.
Investment decisions are guided by emerging trends in logistics and supply chain management.
"Thematically, we're particularly interested in locations with good transport routes that will be favoured by occupiers long-term, providing access to both transport infrastructure networks and consumer bases for e-commerce or other activities," McNally said.
Within the current economic climate, the chief executive stressed the importance of maintaining flexibility and reassessing strategies to ensure target returns are met.
"With rising interest rates and construction costs, we've had to look at different strategies in terms of timing and exit strategies to ensure we're still meeting hurdle returns," McNally explained. "It's about carefully examining each asset's particular contributions. In the previous low-interest rate environment, entire sectors benefited, whereas now it's really about asset selection."