AustraliaSuper begins direct assault

The Australian superannuation scheme, which has a property portfolio in funds worth around $4.6 billion, has made its first direct overseas investment by acquiring a £270 million stake in a UK shopping center.

AustralianSuper has revealed the purchase of major stake in a UK shopping center which counts as its first direct overseas investment.

The superannuation fund, which is trying to diversify from a property portfolio in funds of around $4.6 billion, has acquired a 50 percent stake worth £270 million (€324 million; $443 million) in thecentre:mk in Milton Keynes, north west of London.

The deal, that was concluded late last year and follows a decision by AustralianSuper to commence direct investment within certain asset classes, including property, is an initiative that is expected to save hundreds of millions of dollars in fees for its members. The strategy also gives AustralianSuper more direct control over the management of its investments and it has appointed managers in Australia, the UK and US to source and asset manage direct investments.

In the UK deal just announced, AustralianSuper bought a 50 percent stake in the 1.3 million square foot centre:mk from Hermes Real Estate Investment Management, which is acting on behalf of its major client investor, The BT Pension Scheme. Hermes itself has embarked on a programme of recycling capital from domestic real estate into international property assets for its investors.

Jack McGougan, head of property at AustralianSuper, said: “AustralianSuper has been monitoring the UK retail property market for quite some time and thecentre:mk is an excellent fit for our portfolio as the dominant centre in a region which is one of the fastest growing in the UK.”

In a recent interview, McGougan said the super annuation scheme was particularly keen on retail assets. He said: “There is a particular type of shopping centre that we are really attracted to and that’s the high end regional shopping centres, those centres that sort of dominate their catchment and they attract the consumer dollars.” Its interest comes despite the growth of online shopping, as McGougan explained: “That environment has been interesting and not just in Australia but across the globe you are seeing this polarisation in shopping centre performance and it is, to a large part, driven by online shopping. What you see happening is the retailers are gravitating towards the better centres so they have got fewer, more productive stores in the better centres.”

AustralianSuper was advised in the deal by Henderson Global Investors. As PERE revealed in June last year, Henderson won a beauty parade in 2013 to become the investment manager for AustralianSuper’s emerging UK retail property strategy as part of its global direct push. Like most Australian superannuation funds, AustralianSuper – which has A$60 billion of assets – has been investing in real estate for at least 20 years.

Myles White, director of property of retail property for Henderson, said: “Since being appointed by AustralianSuper in June, we have worked collaboratively with Jack and his team to identify an optimum entry point into the UK retail market.”