As Japanese institutional investors increase their overseas real estate exposure, Australia has become a target market for different risk and return investment strategies. As Richard Stacker, chief executive officer for industrial at Charter Hall Group, explains one draw is the comparatively cheaper cost of hedging in Australia than many other places in the world, with the base rates in Australia being lower than the US at present.
So, Japanese capital that we have seen in Australia is really coming in three ways. The larger investors, which are really looking to take a lot more risk. Mixed-use development – we have seen Japanese investors look at various opportunities there. There is a short list of those. There have been fund of fund managers that have been investing into Australian real estate. And that is really I think been testing the waters for what we are seeing now, which is these larger Japanese pension funds that have provided mandates to various gatekeepers to go and invest into Australia. In terms of ticket size, the ticket size really ranges between A$10 million up to A$80 million in any single investment into funds. But the average size is probably somewhere around A$30 million to A$50 million.
I think most Australian funds, because they are actually in Australian dollars rather than US dollars, the hedging is normally left up to the investors. So, we have some investors that will take a hedge position. I guess the more positive thing for Australia is that the interest rates… the base rights are actually lower than the US now. So, the cost of hedging is actually not as high as some other regions around the globe. And I think that is actually putting Australia back on the map for overseas investors looking at investing, if they do have to hedge. And there is probably I’d say, out of those people we talk to, around 50 percent that would be looking to hedge.