Retirement
Rest invests in US-based REIT amid changes in debt financing markets
Retirement
Rest invests in US-based REIT amid changes in debt financing markets
In a strategic move that underscores the evolving landscape of commercial finance, Rest, one of Australia's largest profit-to-member superannuation funds, has announced a significant investment into the US-based real estate investment trust (REIT), STORE Capital. The investment, amounting to US$250 million (approximately A$390 million), is part of a co-investment with funds managed by Blue Owl Capital, a prominent alternative asset manager.
Rest invests in US-based REIT amid changes in debt financing markets
In a strategic move that underscores the evolving landscape of commercial finance, Rest, one of Australia's largest profit-to-member superannuation funds, has announced a significant investment into the US-based real estate investment trust (REIT), STORE Capital. The investment, amounting to US$250 million (approximately A$390 million), is part of a co-investment with funds managed by Blue Owl Capital, a prominent alternative asset manager.
This investment into STORE Capital is particularly noteworthy as it highlights the growing demand for alternative sources of commercial finance, spurred by systemic shifts in debt financing markets. STORE Capital, known for acquiring commercial properties and leasing them back to business owners under long-term 'triple-net leases', stands to benefit from these market changes.
Andrew Bambrook, Rest’s Head of Real Assets, Investments, elaborated on the strategic nature of this investment. "The commercial finance sector has shifted in recent times. Many traditional lenders in the US have exited the sector, which has provided an opportunity for asset owners to step into this void and help businesses finance their growth,” he stated. Bambrook further explained that sale-and-leaseback transactions offer a dual advantage: they allow business owners to unlock capital tied up in their premises while providing asset owners like Rest with long-term, predictable cashflows.
The mechanics of a triple-net lease are such that the tenant is responsible for operating the business at the property, maintaining the property and improvements, and covering expenses like insurance and property taxes. This arrangement offers a stable and predictable income stream for investors, a factor that Rest finds particularly appealing given the long-term financial planning required for its 2 million members.
Bambrook highlighted the broader economic trends influencing this investment decision. "Inflation and interest rates are likely to stay higher for longer, which increases the attraction for businesses to rent rather than own real estate. We expect this shift will create more attractive investment opportunities for our members,” he noted. This perspective aligns with Rest's long-term investment strategy, which takes into account major forces shaping the global economy and society.
Diversification is another key aspect of Rest's investment in STORE Capital. Bambrook pointed out that the STORE Capital portfolio, which includes more than 3,000 properties with over 600 tenants across 49 US states, offers greater exposure to assets in the retail and industrial sectors. "The portfolio is much more diversified than you’d typically see in real estate portfolios. This can create a durable portfolio that is more resilient to economic volatility, providing stable income streams and downside protection for Rest members,” he said.
The co-investment with Blue Owl Capital, a firm known for its expertise in alternative asset management, further underscores the strategic nature of this transaction. Alicia Gregory, Managing Director at Blue Owl, expressed her enthusiasm for the partnership. “We are pleased to co-invest with Rest on this transaction and for Blue Owl to continue serving as a partner of choice for private markets investors based in Australia,” she stated.
This collaboration between Rest and Blue Owl Capital not only highlights the attractiveness of STORE Capital's business model but also reflects a broader trend in the investment community towards seeking out opportunities that offer resilience and growth potential in a changing economic landscape. As traditional lenders retreat from certain sectors, alternative asset managers and institutional investors like Rest are stepping in to fill the gap, providing businesses with the capital they need to thrive while securing long-term benefits for their members.
Rest's investment in STORE Capital is a strategic response to the shifting dynamics of the commercial finance sector. By aligning with a partner like Blue Owl Capital and investing in a diversified portfolio of triple-net lease properties, Rest is positioning itself to take advantage of emerging trends in the global economy, ultimately benefiting its members in the long run.
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