HESTA’s big plan to invest in European student beds, self-storage
One of the country’s largest super funds, HESTA, will look to invest in student accommodation and self-storage facilities in Europe, taking its $93 billion funds pool further into the global property market.
While HESTA already owns commercial real estate in the US, its fresh charge into Europe puts it in the company of industry peers such as AustralianSuper and Aware Super, which have been buying big in the UK and Europe.
The major Australian super funds have long had positions in the property market, including offshore, but the pressure to go global is increasing as they outgrow investment opportunities at home
HESTA has just appointed US global real estate investment firm Heitman to manage its European property investment mission into what is termed alternative property types, as distinct from the traditional areas of office towers and shopping malls.
Heitman will look instead for opportunities in Europe to invest in self-storage facilities, student housing, residential and healthcare-related real estate – all areas which are generating plenty of interest for institutional players.
“HESTA’s real estate portfolio is well diversified both here in Australia and globally,” its head of portfolio management, Jeff Brunton, said in a statement to The Australian Financial Review.
“Our current offshore property investments are across many sectors and themes, including office, retail, industrial, digital real estate, multifamily and healthcare.”
The amount of capital to be involved has not been revealed, but could be close to $1 billion, on a rough estimate.
HESTA has been underweight in property and has been gradually stepping up investment into the sector. Its balanced growth option – the default for the majority of its 1 million members – has an allocation of 6 per cent to real estate. A little more than a third of that sum is deployed offshore.
“The decision to invest in European alternative property types is driven by attractive risk-adjusted returns, our extensive research in the sector and our focus on diversifying exposures in emerging opportunities,” Brunton said.
The mandate is a win for Heitman, which has about $76 billion under management globally.
Heitman has nearly $700 million invested in Australia and manages nearly $8.5 billion on behalf of 17 Australian mandates, including one from HESTA for core US real estate.
Heitman has long been an advocate for alternative property types based on what it says are its demographic demand drivers, the geographic diversification they allow and the strong cash yields they offer compared to traditional property types.
“Unlike the traditional property types, the alternative sectors are driven by needs-based demand and are undersupplied, making them less tied to economic cycles,” said Caleb Mercer, managing director for European real estate investment at Heitman.
“We believe this makes them an attractive way to benefit from the price reductions available in Europe whilst mitigating exposure to uncertain economic conditions.”
