Amped in Australia

AMP Capital’s latest private equity real estate fund, the largest ever in Australia at just over A$200 million, shows the growing sophistication of Australian LPs. By Paul Fruchbom

Though Australia is the sixth largest country in the world by landmass, its peer group when it comes to real estate investing is not Brazil (number five) or India (number seven), but rather Ireland and Holland, two countries where a significant amount of domestic capital is invested overseas.

We’re running about a decade behind the US. It’s far more mature now. The institutional investors all have allocations to it.

Dale Phillips, head of real estate private equity, AMP Capital

Nevertheless, as Australia’s largest superannuation funds continue to target foreign property investments, a number of domestic firms are finding opportunities at home. Buoyed by a growing economy, strong historical returns and, perhaps most importantly, an increasingly sophisticated limited partner base, the Australian private equity real estate sector is slowly catching up to its counterparts in the rest of the world. Reflecting that trend, Sydney-based AMP Capital has just raised the largest real estate fund ever focused on Australia.

Earlier this year, the firm closed Select Property Portfolio No. 2 on A$201 million ($147 million; €117 million), the firm’s fifth opportunistic real estate vehicle. According to Dale Phillips, head of real estate private equity at the firm, AMP began its involvement in the asset class in 1997, when it partnered with developer Charter Hall, now an opportunity fund manager as well, to raise Property Development Portfolio No.1.

“Our fund with Charter Hall was the first institutional product on the market,” says Phillips. “We’re running about a decade behind the US. It’s far more mature now. The institutional investors all have allocations to it.”

Those growing allocations have allowed AMP to not only grow its assets under management, but also to branch out on its own. After raising two more development funds with Charter Hall, AMP raised its first independent vehicle in 2003, corralling A$105 million. The fund, befitting its opportunistic stance, invested in a wide variety of projects, including office buildings, retirement living projects and hotel conversions.

In SPP No. 2, AMP will continue to invest across a wide variety of sectors, though its geographic focus may be more heavily weighted to Western Australia and Queensland. In those two regions, Phillips notes, the local economies have benefited significantly from their natural resources and growing demand from China.

And speaking of China, AMP Capital’s parent group, a publicly listed company that manages approximately $A100 billion, is expanding into the Asian markets. Though the firm’s private equity real estate platform is still focused exclusively on Australia and New Zealand, Phillips notes that, in the future, the Asian markets could be a potential target.

“[AMP’s] most profitable businesses are in property and infrastructure,” Philips says. “Those are the areas we’re focused on growing.”