19 Sep 2009

Super funds put money into property

OF THE $18 billion that has poured back into real estate investment trusts in the past year, a substantial amount has come from industry superannuation funds, as they shift their focus back to the ailing property sector.

More than $100 million is flowing into separate funds each month. The funds believe bricks and mortar are offering good returns. The fund managers are obliged to seek out the best returns for members, and with more REIT managers recapitalised because of support for their capital raisings, they are confident the next year will be one of growth for trusts.

This is a 360-degree turnaround from even six months ago. The REITs will not go on a buying spree of new assets, or each other, but the money does give them breathing space to consolidate their operations.

In the 2008-09 reporting season, all the managers were ”cautiously optimistic”. Industry super fund managers say that has been enough to give them confidence to support this next growth phase.

Funds such as CBus are said to have changed their focus and are willing participants in the property sector.

Another is the government-backed Future Fund, said to be reviewing a number of opportunities. These industry funds, also including Industry Superannuation Property Trust and Unison, among others, are said to be potential buyers of the ING Group’s Joondalup shopping centre in Perth.

Although not from an industry fund, but as an investor in the sector, the head of property for Australian Unity, Martin Hession, said that as the new financial year progresses, he believes that the long term fundamentals of property remain strong.

”It would be hard not to find a period in history where there was not a better time to buy commercial property,” he said. ”We are beginning to see improvements in market sentiment, helped by a series of encouraging signals including the positive GDP growth figures for the last quarter, the sharemarket’s solid gains since March, increased level of property acquisition activity, and the series of significant capital raisings from the listed real estate investment trusts.”

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