Though Australia is the sixth largest country in the world by landmass, its peer group when it comes to real estate investing is not Brazil (number five) or India (number seven), but rather Ireland and Holland, two countries where a significant amount of domestic capital is invested overseas.
Nevertheless, a number of Australian real estate firms are finding opportunities at home and one of them, Sydney-based AMP Capital, has just raised the largest private equity real estate fund ever focused on the land down under.
Earlier this year, AMP closed Select Property Portfolio No. 2 on A$201 million ($147 million; €117 million), the firm's fifth opportunistic real estate vehicle. According to Dale Phillips, head of real estate private equity at the firm, AMP began its involvement in the asset class in 1997, when it partnered with developer Charter Hall, now an opportunity fund manager as well, to raise Property Development Portfolio No.1.
“Our fund with Charter Hall was the first institutional product on the market,” says Phillips. “We're running about a decade behind the US. It's far more mature now. The institutional investors all have allocations to it.”
Two more development funds with Charter Hall followed and in 2003, AMP Capital branched out on its own to raise its first independent vehicle, which corralled A$105 million. The fund, befitting its opportunistic stance, invested in a wide variety of projects, including office buildings, retirement living projects and hotel conversions.
In SPP No. 2, AMP will continue to invest across a wide variety of sectors, though its geographic focus, while still limited to Australia and New Zealand, may be more heavily weighted to Western Australia and Queensland. In those two regions, Phillips notes, the local economies have benefited significantly from their natural resources and growing demand from China.
And speaking of China, AMP Capital's parent group, a publicly listed company that manages approximately A$100 billion of assets, A$12 billion of which is invested in real estate, is expanding into the Asian markets.
“[AMP's] most profitable businesses are in property and infrastructure,” Phillips says. “Those are the areas we're focused on growing.”