UniSuper sharpens focus on direct investments in property
UniSuper, one of Australia's largest superannuation funds, is ramping up its direct property investment exposure with the acquisition of the Burra Park estate, a logistics development site in Sydney.
“Increasing the fund’s directly owned property portfolio continues to be a primary focus,” Nick Stephens, senior manager, property at UniSuper told AsianInvestor.
The A$127 billion ($83.4 billion) super fund’s latest acquisition complements its past direct investments in high-quality retail properties such as Pacific Fair and Macquarie Place.
“Over the past 18 months we’ve focused on increasing our industrial exposure via both established assets and develop-to-core opportunities,” he said.
UniSuper’s focus on direct investments is being driven by the growth of the super fund itself, and its increasing capacity to seek out such premium investments to enhance its portfolio. Currently, the fund has about 6% of direct property exposure.
“We remain cautiously opportunistic and continue to look for high quality investments that complement and add to our portfolio,” Stephens said.
CONFIDENT APPROACH
As the Australian Prudential Regulation Authority (APRA) continues to demand stricter valuation practices for unlisted assets from the A$3.6 trillion superannuation industry, UniSuper’s investment focus signals confidence that its operations will meet regulatory requirements.
Also read: UniSuper discusses unlisted asset valuation as regulatory scrutiny rises
The fund’s measured approach to its unlisted asset portfolio, which include significant holdings in property and infrastructure, means that the added regulatory scrutiny is unlikely to affect its operations or strategy, according to Sandra Lee, head of private markets at UniSuper.
UniSuper
“Our directly owned unlisted assets are independently valued on a quarterly basis. We consider this to be best practice and in our members’ interests,” Lee told AsianInvestor.
The fund also arranges for out-of-cycle valuations for its unlisted asset holdings when circumstances warrant, which aligns with the APRA's emphasis on timely and accurate reporting, she said.
STRONG FUNDAMENTALS
UniSuper's pivot towards industrial and logistics real estate over the last few years is also driven by compelling factors which create a positive outlook for the sector, according to Stephens.
“The demand and supply fundamentals underpinning this are driven by a range of factors like population growth, an increase in e-commerce penetration, and inventory management trends matched against a structural shortage of readily developable industrial land in the key markets we invest in,” he said.
Also read: Why APAC logistics holds strong appeal for institutions
As UniSuper expands its direct property portfolio, the fund must remain conscious of the strong potential for fluctuating interest rates and the inherent risks they pose to achieving long-term returns, said Stephens.
“Our recent industrial acquisitions have been acquired without the use of debt,” he said. “A key pillar of our unlisted property portfolio is low leverage coupled with effective hedging policies. This has helped mitigate the impact of interest rate rises on portfolio returns.”
GREEN FOCUS
In the case of Burra Park, a 280-hectare greenfield logistics development site in Sydney’s tightly held western industrial precinct, UniSuper is aiming to set a new benchmark for sustainability in the sector.
“We will look for opportunities to achieve carbon neutrality through initiatives like energy efficient design, use of photovoltaics and embedded networks, and the procurement of renewable energy,” said Stephens.
UniSuper’s initiatives in environmental stewardship also reflect the growing importance of sustainability in property valuations and its appeal for Australia’s superannuation industry.