Unlocking First Nations Investment in Commercial Property: Indigenous Business Australia
Commercial property investment is just one way Indigenous Business Australia seeks to enhance economic development opportunities for Aboriginal and Torres Strait Islander people across Australia.
Dr Siddharth Shirodkar, Principal Economist at Indigenous Business Australia (IBA), recently addressed the PFA 2023 Conference on the various ways IBA seeks to improve home ownership, business ownership, investment, wealth and agency among First Nations people.
Dr Shirodkar said IBA provides access to loans, and invests alongside Indigenous organisations. “The organisations we co-invest with are unique and often have a key role in the community for the delivery of services. Some have been created through Native Title settlements or Indigenous Land Use Agreements, or provide vital medical or logistical support for the region.”
The co-investment has also led to the creation of investment funds, which provide access to investment opportunities for Aboriginal and Torres Strait Islander organisations. Its Indigenous Real Estate Investment Trust (or I-REIT) is a property trust created to enable access to the returns from Australian commercial property.
“The I-REIT gives First Nations investors the opportunity to invest alongside IBA and other Aboriginal and Torres Strait Islander investors to access an actively managed portfolio of Australian commercial property.
“Commercial property is often at a scale that is out of reach for many organisations, so back in 2013 we took four of our properties, which had four Indigenous co-investors, and created a trust, issuing units to IBA and those four organisations.
“The I-REIT has grown to invest in 10 properties alongside 30 Indigenous organisations across Australia, and is now majority owned by the Indigenous organisations.”
Dr Shirodkar said the properties consist of retail, office and industrial properties, and are geographically dispersed throughout Australia, including Townsville and Cairns in Queensland, Kalgoorlie and West Pinjarra in WA, Mitcham in Victoria, Warabrook and Wagga Wagga in NSW and Katherine in the NT.
The current value of the properties is over $150 million and the trust has returned 9.5% per annum since inception in December 2013.
“This is primarily an income return to investors, with over $62 million paid out in cash distributions to date. Those distributions are paid out twice a year. We seek to make them regular in size, and our investors like the consistency, which allows them to manage their cash flow.
“The I-REIT is managed by a small team of property professionals within IBA, and we do that on a not-for-profit basis so we can maximise returns for our co-investors and IBA.
“This direct involvement and IBA’s direct investment in the fund is key to the attractiveness for Indigenous organisations, who trust IBA to manage these assets on their behalf and with their community in mind”, Dr Shirodkar said.
Other investment funds launched by IBA include the Indigenous Prosperity Funds (IPF), a highly diversified investment fund that IBA created following the success of the I-REIT, which provides access to institutional investment alongside IBA and 40 other Indigenous organisations. It consists of a Growth Fund and an Income Fund, allowing organisations to tailor their risk and return profile.
“This co-investment concept is important, because IBA has developed trust with Indigenous organisations through long-standing partnerships.”