In this article we discuss four directly owned property investments. Three are residential estates in fast-growing Western Australia and South-East Queensland, and the fourth is a purpose-designed commercial building that from its inception has been occupied by the Department of Foreign Affairs and Trade (DFAT) in Canberra.

Alkimos, WA

Just over 40 kilometres North of Perth is Alkimos, where MTAA Super, in December 2007 acquired a substantial interest in a large residential development site. The Fund’s partners in the investment are Peet Limited, a property development company with more than 114 years of history in Australia, and the Myer Family Office.

The site, known as Shorehaven, has a substantial protected beach and has been divided into three areas for development, the Eastern Precinct, the Central Precinct and the Coastal Precinct. Overall there will be around 2,800 residential blocks available within this development, with the first blocks due to come to market in early 2010.

Logan Shire, Queensland

In the Logan Shire, mid-way between the Gold Coast and Brisbane, MTAA Super owns two residential estate developments. These were acquired in 2000 and one, called Spring Mountain, is deemed ‘rural residential’ – that is, the blocks are large; somewhere between four thousand and eight thousand square metres each.

The other estate is in two parts, Flagstone East and Flagstone West. This area is part of what the Queensland Government has identified as a ‘preferred settlement’ area, as it plans for expected population change in its South East Queensland Regional Plan. According to the Department of Infrastructure and Planning the population of South East Queensland is expected to rise from 2.8 million to 4.4 million by 2031. This preferred settlement status was good news for the development of the Flagstone residential estates, as there are now more blocks able to be developed per hectare. The estates still have around 10,500 blocks yet to be developed.  

This is a flourishing area, with a range of industries for potential employment and an influx of families looking for home sites.

A stone’s throw from Parliament House, Canberra

MTAA Super also invests in high quality commercial buildings with good long-term tenants. One such example is the RG Casey building in Canberra. Designed for, and fully tenanted by the Department of Foreign Affairs and Trade (DFAT), and a stone’s throw from Parliament House, this was previously a Commonwealth asset, sold during the divestment of the Commonwealth’s property portfolio in 1999.

This was initially a co-investment with the Commonwealth Bank but since mid-2009 MTAA Super owns 100 per cent of the asset. DFAT is expected to negotiate another extended lease term with MTAA Super when the current lease expires.

Valuing direct property investments

The Fund employs independent professional highly experienced valuers and has a stringent regular valuation schedule.

Property is valued in similar ways to other directly owned assets. Valuations consider the long-term cashflows generated by the asset and take into account the lease profile of the building and the credit risk of the tenants among other considerations. Valuations are also partly based on evidence of other transactions for similar properties. For example, for a large residential estate transactions for both tracts of undeveloped land and sales of developed blocks in comparable regions would be assessed, and a range of valuation methodologies applied to arrive at the value.

During the global financial crisis and the following economic downturn, every asset class was affected, and MTAA Super’s property investments have moved in line with market changes for the direct property asset class generally. However, the Fund’s policy of conservative investment in high quality property, in good locations with stable long term tenants, means that as recovery is established in economies, the quality of the assets will continue to support long term returns.