Partners Group says the time is right for investment in the industrial market due to the strong competition for the office building market.
The Swiss-based company typically looks at assets in the $50m-$150m range, with gearing of about 50 per cent.
“In the next four to five weeks, we could be putting another $200 million into the Australian market,” said Claude Angeloz, Partners’ co-head of private real estate, who has been in Australia looking at a mostly Sydney industrial portfolio.
Mr Angeloz said the Partners Group was in due diligence and could not go into detail until a deal was signed.
“We just lost a deal in an Asian city over the weekend, where we were looking to buy an industrial building,” he told The Australian.
Mr Angeloz said the industrial sector is the way to go, as it is not yet as competitive as the office market.
“Today we look at industrial. Two years ago we looked at offices and bought a portfolio valued at $100m. But we would not buy more offices now because of the strong competition,” he told The Australian.
Rather, he said, Partners would sell some office buildings, which have been refurbished, at the end of next year or in 2016.
“We have no pressure or obligation to put money into Australia (or anywhere else),” he said.
“I will be in Korea next week to look at three office deals in Seoul, and if (they) make more sense … we will put our money there.”
According to The Australian, Partners’ strategy has been to turn B grade buildings into A grade assets where it is able to extract higher returns for its investment.
Mr Angeloz said the group was also prepared to look selectively at development projects. “We are looking at some assets in Sydney, which will involve a fair amount of development.”
As well as inbound investment, Partners expects to receive mandates from super funds to invest in offshore real estate.
Martin Scott, who heads Partners in Australia, said there could be at least two mandates for real estate investment outside Australia, but unlike previous forays into offshore markets, super funds had a specific strategy of how they want to invest.
Mr Angeloz said investors had to ask themselves whether international diversification would deliver returns commensurate with the higher risks involved.
“The answer depends on your approach. If, for example, investors go overseas just to buy core assets — and only in certain locations — I expect that the majority of people will be disappointed,” he said. “It is critically important that you can assess the different markets, where they are in the property cycle, and understand why parts of the market are attractive for new investment.”
After the financial crisis, it was thought property values would fall globally, but that was not to be the case.
Partners had looked at mezzanine debt and preferential equity in the Australian property market, but no opportunities translated into deals.
Globally, the group has some $US8bn of capital invested in real estate and, with gearing of around 50 per cent, holds assets with a gross value of $US15bn.
Mr Angeloz said the firm had a war chest of about $US2bn in capital that was available for investment.
Source: The Australian