AustralianSuper’s Head of European Property, Paul Clark, spoke to Blackstock Consulting’s founder, Andrew Teacher about establishing the Fund’s real estate presence in London and why working for organisations with purpose lends itself to long-term investment.
In UK terms, AustralianSuper can be classed as a mutual. “We’re there for Members’ profit and to provide the best possible retirement outcome for our Members,” says Clark. “The money comes in and it’s our job to turn that into excellent returns.”
“We are looking to take advantage of changes around digitisation, demographics and place making in society and the economy. If we can do that then we will drive outperformance from our property portfolio. Because it’s an imperfect market you’re better off doing as few things as possible as well as you can.”
More than anything else, says Clark, “it’s climate change that will have the largest influence on real estate values for the rest of our lifetime and you need to look at the sustainability of the locations and the buildings that you’re getting involved with.”
The Fund has focused in London on the sort of large scale, long-term investments that don’t come along often and few global investors have the appetite for. “Successful regeneration projects in London tend to have three characteristics: location, scale and a commitment to quality. For that you need investors with long term time horizons.”
Public markets tend to value property companies on a narrow set of criteria, says Clark, often ignoring the wider long-term benefits that come from investing more in assets. The regeneration premium due to successful placemaking “delivers stronger rental growth and higher end values than if you were just developing a single building.”
Talking about investments in Kings Cross and, more recently, Canada Water, Clark said: “The journey we’re going on will see us get to the point where we’ve not just built a few office buildings and some flats, actually we’ve created a new environment and new communities and we’ve done that in a very sustainable way.”
Away from development-led mixed-use city-centre investments, Clark is attracted to logistics assets but was wary of investing at the back end of the bull market. However, the changing market environment might alter that: “When you’re in a market that’s more challenged – and there are going to be winners and losers over the next couple of years or so – you need to be sure that you have made strategic bets you’re comfortable with.”