Australian Private Real Estate Driven by Domestic Firms

In our recent Preqin Insight: Alternative Assets in Australia report, we explore the fundraising environment of Australia-based firms managing closed-end private real estate funds. While the majority of capital raised by managers in the country is geared towards domestic investments, here we take a look at whether any international GPs are exclusively targeting Australia as well.

According to Preqin’s Real Estate Online, there have been 75 closed-end private real estate funds closed since 2006 that solely focus on Australia. Of these, only nine are managed by firms based outside Australia, and from only five real estate firms: CIMB TrustCapital, Deutsche Asset & Wealth Management, LaSalle Investment Management, Macquarie Infrastructure and Real Assets and SachsenFonds Asset Management. This demonstrates that international real estate firms do not often look to Australia as a primary destination for investment, although they may consider the country as part of a wider Asia-Pacific or global fund geographic focus.

The dominance of domestic firms in the Australian market is illustrative of an industry with relatively high barriers to entry, as well as investors’ preference for deal teams to be situated in local markets. The majority (66%) of non-domestic fund managers primarily utilize core strategies, suggesting that opportunities may only exist for larger managers that are able to deploy large amounts of capital to acquire prime assets. CIMB-TrustCapital Australian Office Fund I & II, as well as SachsenFonds Asset Management’s Australia Fund I-III, employ core strategies.

The lack of non-domestic fund managers exclusively targeting Australia looks set to continue: according to Preqin’s Real Estate Online, of the 10 funds currently in market solely targeting Australian investment, only one of these is being marketed by a non-domestic manager.