Valuations in Australia’s commercial property market are coming down and industry superannuation behemoth Hostplus is discontinuing its independent property and infrastructure funds.
It comes as pressure mounts over the soaring values of office and retail properties. In addition to rising interest rates, the pandemic-inspired shift towards remote labour and internet buying has jolted these industries.
For example, last week Dexus sold a 26-story A-grade office at 44 Market Street in the heart of Sydney for $393.1 million, a 17% discount on its December book value, and this week Chinese insurance giant Ping An put on hold the sale of a 50% stake in the Salesforce Tower in the harbour city after receiving bids about 10% lower than hoped for.
Given their reliance on unlisted commercial real estate assets, industry super funds are particularly exposed to write-downs.
APRA has increased its examination of how super funds evaluate unlisted assets out of fear that they have overinflated their worth.
It’s about time. Big Super has been misusing commercial property to dupe members for years.
The scam is simple. Because commercial property valuations are not marked-to-market, Fat Super has been able to pretend that its unit trust valuations are higher as other more liquid assets adjust lower.
This is fine for existing units over the short term. But new money is buying units at inflated valuations that are massaged down over the cycle.
Thus new superannuation flows are being duped to subsidise existing ones.
