UniSuper clocks in for $560m stake in logistics portfolio
Industry super fund giant UniSuper has stepped up its exposure to logistics within its property portfolio – one of the best-performing areas of commercial real estate – clinching a $560 million deal for a half stake in an industrial portfolio, to stand alongside Blackstone and ASX-listed Dexus.
The UniSuper investment, now finalised, takes over the position in the $1.1 billion Australian Industrial Partnership that had been held by South Korea’s National Pension Service. The initial yield on the deal is thought to be in the mid 4 per cent range.
For UniSuper, the acquisition boosts its exposure to one of the few bright spots within the broader commercial property market, where returns more broadly and valuations have been battered by rising rates. Office property faces the particular challenges of rising vacancy rates and the resilience of the work-from-home trend.
Nick Stephens, UniSuper’s senior manager for property, noted the super fund giant had made a significant investment into the retail sector through its acquisition of stakes in Pacific Fair and Macquarie Centres in late 2021.
“More recently we have focused on expanding our directly owned industrial asset exposure with high-quality investments,” he told The Australian Financial Review. “The timing of the current investment is based on our positive outlook for the demand and supply fundamentals underpinning the industrial sector and the quality of the assets now available in the market well below recent peak pricing.”
The $120 billion super fund delivered one of the sector’s highest returns for the financial year at 10.3 per cent, as a result of its long commitment to technology stocks and with its relatively small allocation to unlisted property.
While UniSuper’s property portfolio delivered slightly negative returns overall in the last financial year, it was the strong returns from its industrial exposure – a sector where rental growth has been strong – that offset declining office tower values. Office towers account for about 1 per cent of funds in UniSuper’s balanced options. UniSuper’s property portfolio has risen close to $8 billion through the latest deal, with about 20 per cent in industrial.
The deal gives UniSuper a half stake in a portfolio of 20 assets. Of that, 12 are in the well-regarded Quarry Industrial Estate in Sydney’s west, while the remainder lie within one of Melbourne’s key industrial markets, at Truganina in the city’s west.
The deal – brokered by Cushman & Wakefield’s Tony Iuliano and AdrianRowse – represents the largest portfolio trade since 2021. While rental growth has held up values in the sector, major transactions have eased back considerably since the rush two years ago. In the first quarter this year industrial deal volume reached just $1.1 billion, an 82 per cent decline on the comparable 2022 tally.
But Mr Iuliano said there was still plenty of appetite for top-performing industrial assets.
“We have experienced a significant level of capital focussed on premium grade assets where flight to quality has become a major focus,” he said. “This major transaction reconfirms capital inflows into the Australian logistics sector remain the number one focus for groups throughout the Asia Pacific region.”
The portfolio comprises around 342,000 square metres of industrial space and its tenants include as Coles, Toll, Northline, Roche, Blackwoods, Symbion and UPS.
