Rest has joined forces with alternative asset manager Blue Owl Capital, co-investing in a real estate trust, with the aim of capitalising on systemic changes in debt financing.
The super fund said the move reflects the rising need for alternative sources of commercial finance, which have created fresh investment opportunities.
The co-investment will be made into US-based real estate investment trust STORE Capital and will also comprise a minority equity stake in STORE Capital’s operating business.
STORE Capital’s investment strategy involves buying commercial properties from business owners and leasing them back for long-term ‘triple-net leases’, typically lasting around 20 years.
Under such a lease, the tenant is responsible for operating the business at the property subject to the lease, maintaining the property and its improvements, and covering all associated costs, such as insurance, property taxes, and other property-related expenses.
Andrew Bambrook, Rest’s head of real assets, investments, explained that the current climate of sustained inflation and higher interest rates is making real estate rental – rather than ownership – increasingly appealing for businesses.
“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 said.
According to Bambrook, sale-and-leaseback transactions offer business owners the opportunity to free up capital invested in their properties, which can then be reinvested into their operations, with the added benefit of continued security and stability provided by a long-term lease.
Meanwhile, for asset owners, like Rest, triple-net leases can offer “long-term, predictable cashflows”, often over 15 and 20-year periods.
Bambrook emphasised that the investment highlights the importance of long-term planning for the super fund, given that most of its 2 million members are still decades away from retirement.
“This investment is expected to benefit from one of these megatrends: systemic changes to debt markets,” he said.
He added that the STORE Capital portfolio is particularly attractive, as it provides greater diversification than typical real estate portfolios, with increased exposure to retail and industrial assets.
“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.
STORE Capital’s portfolio comprises over 3,000 properties located across 49 US states, housing more than 600 tenants, all of which are backed by long-term triple-net leases.
Managing director at Blue Owl, Alicia Gregory, concluded that the asset manager is pleased to enter 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,” Gregory said.
