SYDNEY: Australian pension fund Rest said on Wednesday it would invest up to $250 million in a U.S. retail property fund, as it banks on traditional retailing remaining strong across America. The investment will be made to the U.S. Cities Retail Fund (USCRF), managed by Nuveen Real Estate, which owns neighbourhood shopping centres across the country’s major metropolitan areas.
The fund currently holds 10 retail properties in cities including Austin, Philadelphia and San Diego, with five additional shopping centres recently secured for inclusion in the portfolio. Rest said the centres were tenanted by major U.S. grocery stores and retailers such as Trader Joe’s, The Fresh Market and Harris Teeter.
“We like the fact that if you think of a household budget, this is, along with housing, the first dollar (spent) out of that budget,” Andrew Bambrook, Rest’s head of real assets – investments, told Reuters in an interview.
“We’ve seen these sort of assets perform really well in both up cycles, but also in more challenged market cycles.
“There’s not the same level of fluctuation that you might get with some of that more discretionary retail.”
U.S. consumer spending, which accounts for more than two-thirds of economic activity, increased 0.4% in January after advancing by the same margin in December, figures published last week showed. Despite the lift, U.S. gross domestic product growth slowed at a sharper pace than initially thought in the fourth quarter.
Bambrook said the investment was the first of its kind for Rest in the U.S. retail sector. The fund, he said, was also exposed to future growth in online shopping with investments in warehouse and logistics projects around the world.
“Our view is that we absolutely think there’s a place for both,” he said.
“We do expect the bricks-and-mortar component to remain relevant, and in particular, this sort of necessity-based grocery retail that services local catchments.”
Rest said the investment was expected to deliver stable, risk-adjusted returns across market cycles for its more than 2 million members, while strengthening diversification within its property portfolio.
