Aware Super, the rebranded First State Super, has teamed up with Dutch pension powerhouse APG to take a controlling stake in a European serviced apartment operator in its first direct property deal abroad.
While still relatively small, the platform could eventually hold thousands of apartments in a portfolio worth as much as €500 million (about $810 million).
Damien Webb, Aware’s head of income and real assets, said the move was part of the super fund’s broader strategy to increase scale by investing directly itself across a range of asset classes: listed shares, private equity and real assets.
After its merger with VicSuper this year, the manager controls more than $125 billion in funds and is already making bold plays in the infrastructure sector, including its $600 million offer for private fibre provider OptiComm.
“This is our first direct investment for property in an overseas operating company,” Mr Webb told The Australian Financial Review.
“This is actually a contrarian strategy. We’ve seeded a very capable operator which has very few assets on balance sheet. What we’ve done is provide significant capital support between Aware Super and APG to go out and buy properties at good prices.”
The platform, City ID, is an operator of so-called “aparthotels” in Amsterdam, with three assets comprising more than 250 units. APG acquired a stake in City ID in 2019. Under the latest deal, APG and Aware will each hold stakes of about 45 per cent, investing about ???100 million each.
Backed by the two powerful institutions, the company will focus on the major European capital cities and operate as a fully integrated asset heavy owner-operator.
Aparthotels and their serviced apartments have proven far more resilient during the pandemic slowdown because they cater to both long-term stays and shorter-term business and leisure travellers.
While occupancy slumped to about 5 per cent in mainstream hotels during the worst of the crisis, serviced apartments held up much better with 40 per cent occupancy.
“Together with APG we believe we have the right mix of patient capital and vision to support City ID in scaling up the platform over the long term,” said Aware’s portfolio manager for property, Alek Misev.
The longer-term stays of some occupants at the ID Property facilities are more akin to the multi-family sector, known in Australia as build-to-rent. It is an asset class that fits in well with the expertise Aware has developed through its “beds” strategy in real estate, which includes retirement living and affordable housing in Australia and multi-family with Lendlease in the US.
But Aware will also be turning its attention next to “sheds” in offshore markets, according to Mr Webb, building on its experience in Australia.
“The next cab off the rank for an operating platform we would seek overseas would be one in the industrial area,” he said.