UBS AG (UBSN), Switzerland’s biggest bank, is entering Australia’s property market to invest as much as A$10 billion ($9 billion) over the next five years through a joint venture with a local developer.
The bank, which now only holds property shares in the country, is partnering with Australia’s largest closely held builder Grocon Pty to beat a rush of global capital that’s seeking a home in its real estate market, said Trevor Cooke, Sydney-based head of Asia-Pacific real estate at UBS.
“There’s significant competition in Australia from pools of capital for access to investment-grade stock,” Cooke said by telephone today. “The best way to offer our clients realistic solutions is to partner with an originator. The Asia Pacific as a whole is a strategic priority and Australia is one of the most attractive markets in the region.”
Investor demand for Australian property is climbing, driven by relatively higher yields, and as home prices in the nation’s biggest cities reach records each month. Australia was among the three most active Asia-Pacific markets for commercial property transactions in the three months to Sept. 30, after Japan and China, data from CBRE Group Inc. show. Home prices across the nation’s biggest cities jumped 8.3 percent this year to Nov. 30, according to the RP Data-Rismark home value index.
UBS manages $8 billion of retail and industrial property in Japan through a joint venture with Mitsubishi Corp., and partners with Chinese developer Gemdale Corp. in a residential development fund on the mainland, Cooke said today.
UBS Grocon Real Estate will select investments both from the Melbourne-based builder’s A$2 billion of current and planned projects, and from other sources depending on investor demand, Cooke said. It will set up separate accounts and “club-style” vehicles that have a maximum of five institutions, rather than traditional funds open to multiple investors, he said.
While the number of funds and time-frame for establishing them will depend on investor appetite, “we’re looking for 2014 to be an exciting year in the development of this platform,”Cooke said.
The partnership will begin by focusing on prime office properties for more conservative investors, and residential developments to cater to those seeking higher returns, he added.
The venture will have the first right of refusal on the Australian builder’s planned developments, the companies said in a joint release today.
“This is an exciting opportunity to work with one of the great global brands and one of the world’s largest real estate asset managers,” Daniel Grollo, chief executive officer of Grocon, said by e-mail. “The joint venture will support Grocon’s aim of producing the best investment grade real estate product in Australia.”
John Fraser, who will retire as CEO of UBS’s global asset management business next year while staying on as chairman, will be non-executive chairman of the joint venture, according to the statement. Grollo will be a non-executive director, and the rest of the board will be appointed in the coming months, it said.
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