ISPT re-affirms confidence in non discretionary retail, expands neighbourhood centre and sub-regional footprint

10 June 2024

Having significantly outperformed the benchmark over multiple time periods, leading property fund manager ISPT via the ISPT Retail Australia Property Trust (IRAPT) has re-affirmed its confidence in the non-discretionary retail property market by increasing its investment in Fort Street Real Estate Capital (FSREC).

FSREC owns a $700m portfolio of 12 neighbourhood centre and sub-regional assets. In 2021 ISPT acquired a 75 percent stake in the Fort Street management platform and a 95 percent stake in the FSREC Property Fund – which have now been increased to 100 percent and 98 percent stakes respectively. The remaining interest in the FSREC Property Fund is held by retail investors.

The investment is another step forward for the $2.5 billion IRAPT Fund which has consistently outperformed the industry with an 8.43 percent fund return (net of fees) since inception – significantly above both the MSCI index of 6.58 percent and the MSCI retail index of 3.79 percent over the same period. IRAPT has also been the best performing retail fund in the MSCI retail index over 3, 5, 7 and 10 years.

IRAPT is heavily weighted to non-discretionary retail, with 48 percent of its gross rent derived from supermarkets. IRAPT’s history of financial outperformance combined with its strong returns outlook places the Fund in a prime position to raise capital in the second half of this year and continue its growth trajectory in FY25. The capital will be used for further acquisitions, re-developing existing assets and greenfield developments.

The acquisition comes at a pivotal time for non-discretionary retail spending, which – according to ABS data release in March 2024 – jumped by 4 percent through the year while discretionary spending fell by -0.1 percent.

Quotes attributable to ISPT Group Executive, Head of Funds Management, Matthew Brown

“This transaction increases IRAPT’s exposure to high-quality, non-discretionary grocery anchored retail assets located in dominant catchments across Australia’s major capital cities, underpinned by our objective of investing at scale to generate sustainable risk-adjusted returns.

“Increasing our interest in Fort Street speaks to our ongoing confidence in the non-discretionary retail sector and neighbourhood shopping centres, both of which perform strongly in the face of economic headwinds as people spend their money on convenience and essentials.

“Our investment in Fort Street underpins further growth of the IRAPT portfolio and demonstrates our ability to execute our retail strategy at scale at the same time as we look to actively curate our portfolio as well as unlock development opportunities at our assets. With a strong growth trajectory and a portfolio of supermarket-based retail assets, IRAPT presents high exposure to this defensible asset class for wholesale investors.”