The real estate arm of industry fund Cbus delivered a total return of 6.99 per cent over the 2020 financial year, well down on its long-term average but a relatively resilient achievement nonetheless during a period of upheaval in the property sector.
The return from the property investment and development business of the $54 billion super fund was also streets ahead of the 0.75 per cent return delivered to Cbus members in their default option.
Cbus was among a group of funds, including AustralianSuper and Unisuper, to move at the onset of the pandemic to write down the value of their stakes in airports, ports, toll roads and property in recognition of the effect the coronavirus would have on unlisted assets.
Its annual report, just released, explains that “unlisted assets, such as property and infrastructure, required revaluation to ensure the values properly reflected the COVID-19 impact”.
“To manage the risk posed, Cbus directly undertook this work in March outside the normal cycle of independent valuations undertaken quarterly,” it said.
Cbus Property’s return for the 2020 financial year outperformed its assigned benchmark, the MSCI/IPD Australian Property Pooled Fund, which delivered negative 2.65 per cent over the same period. Over the past 10 years, the property arm has returned an average of 15.2 per cent a year.
Its $4.8 billion portfolio combines residential developments along with commercial projects, which it typically retains on its balance sheet.
Many of Cbus Property’s building sites remained open during the disruption, chief executive Adrian Pozzo reported. But challenges remain for the office sector, with the longer-term impact of working from home still to be determined when workers return to offices in greater numbers, he said.
“The most immediate change to office accommodation will bethe structure of space to align with social distancing regulations,potentially resulting in no contraction of space in the short term,” Mr Pozzo said in the report.
“Though change is inevitable, it is too early to determine the long-term impact of COVID-19. In future, tenants may use office space differently – for task-oriented work, for socialisation, for collaboration and for other tasks that build corporate culture.”
Earlier this year the super fund completed the office tower at its $1.25 billion Collins Arch project on Melbourne’s Collins Street. Last month it finished the new headquarters for Victoria Police on Spencer Street. The developer expects to begin building an office tower on Adelaide’s Pirie Street this year after winning a pre-commitment from the South Australian government.
Cbus Property chalked up wins in its residential business as well, settling the first stage of an apartment project in Sydney’s Randwick and selling its share in a residential development at Collingwood in inner Melbourne, it said.
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