Aware Super has A$3.5bn to deploy in European real estate

Aware Super, Australia’s third-largest superannuation fund, has outlined key details of its plan to expand its overseas exposure to real estate. Of the A$10 billion ($6.6 billion; €6 billion) it has earmarked for investment in private markets across Europe, A$3.5 billion will be deployed in real estate investments.

Speaking with PERE at the investor’s newly opened office in London last week, Damien Webb, deputy chief investment officer and head of international at the A$160 billion superannuation fund, said the fund is under-allocated to private markets, of which real estate has the most headroom for growth. He explained the super fund is projected to grow to around A$250 billion in the next few years.

The team in London, led by Webb who relocated from Australia two months ago, is focused solely on private markets investing. Six employees have transferred from Sydney, and the pension fund is actively recruiting for seven open positions in London, including a property portfolio manager which it hopes to install by early 2024.

Aware Super’s strategy in Europe is predominantly to invest directly, or semi-directly in partnership with other institutional investors, to acquire operating platforms in property across the UK and Western Europe and grow them either organically or through mergers and acquisitions, Webb explained. “Currently, about 60 percent of our real estate portfolio is managed in-house, but we are looking to get this to around 80/20 over the next few years.

“We like to partner with like-minded institutional managers and developers,” he added. “Learning from other groups is important in a new market.”

Aware Super has already made investments in Europe in this vein, predominantly in the residential sector, including in UK build-to-rent operator and developer Get Living in 2023, in Spanish BTR platform Vivenio Residencial Socimi in 2021, and in Dutch aparthotel chain City ID, rebranded The July, at the height of the pandemic in September 2020.

Going forward, the investor is looking to diversify into other sectors including healthcare, self-storage, cold storage and mixed-use. Ticket sizes will typically range between A$200 million and A$1 billion.

Another aim for the pension fund’s business in Europe is to set up an in-house platform through which it can make direct single-asset investments across other real estate sectors, said Webb. The investor has already done this in its domestic market, partnering with Sydney-based manager Altis Property Partners – which was later acquired by Barings – to establish Aware Real Estate in 2022. The business currently manages A$1.9 billion in residential, industrial, office and mixed-use assets across Australia.

According to Alek Misev, Aware Super’s head of property, the investor is currently engaged in conversations with managers to establish a direct property platform in the UK.

In addition to being able to partner with managers and institutional investors, Misev said the flexibility and creativity afforded by an in-house investment arm are especially important in today’s dislocated market.

Since 2015, Aware Super has rebalanced its portfolio to sell all of its office and retail assets outside of Australia, taking office and retail from 40 and 50 percent of its portfolio at that time, respectively, to 20 and 10 percent today. But Misev said the investor is actively looking again at office and retail across Europe because the repricing of the market presents “a blank sheet of paper.”

“We should be looking at office now, when nobody else is,” he said. “We’re already hearing about sellers coming under more pressure to sell, which we expect to see more of next year.”

Aware Super currently has an allocation of 7 percent to real estate, of which 20 percent is invested in Europe and 10 percent in the US – the remainder is invested in Australia. Earlier this year, Misev told PERE the pension’s overseas exposure could reach up to 60 percent of its real estate portfolio, adding the market in Australia was “so small that it doesn’t really make sense to have all your money here.”