Aussie shopping centres attract big US funds

Aussie shopping centres attract big US funds

13 April 2018

Australian shopping centres are garnering interest from global investors, with US funds giant Invesco purchasing a half-stake in the $430 million Grand Plaza Shopping Centre in the Brisbane suburb of Browns Plains, reports The Australian.

The purchase from sector heavyweight Vicinity Centres signals Invesco’s confidence in the premium end of the Australian retail real estate and broadens its holdings in Australia, which are focused on city office towers and industrial parks.

Invesco is a busy player in the Australian market, recently taking a stake in a $430 million office tower being built by Lendlease in Melbourne’s Docklands for ANZ.

The company also bought the Forestway Shopping Centre in Sydney’s northern suburbs for $112m in 2015.

Atlanta-based Invesco is the fourth-largest exchange-traded funds issuer in the U.S. with US$177 billion in assets. It also manages more than US$934.2 billion in assets for clients in 25 countries.

The latest two divestments from Vicinity have been part of a broader sell down as the wholesale fund reaches the end of its eight-year term.

The fund was set up by Colonial First State Global Asset Management and seeded with $600m from eight local and offshore wholesale investors in 2013.

It targeted subregional and neighbourhood shopping centres worth between $25m and $125m.

Last year, Vicinity and Singapore’s sovereign wealth fund GIC agreed to swap Sydney assets worth a combined $1.1 billion.

The fund also sold the Salamander Bay Centre, north-east of Newcastle in New South Wales, to Charter Hall Retail REIT for $174.5 million, a half-stake in Rockingham Shopping Centre, south of Perth, for $305m to AMP Capital, and a half stake in the Runaway Bay shopping centre in Queensland.

Vicinity’s half-stake deals is part of a broader trend by dedicated retail landlords to bring in capital partners, says the AFR.

JLL head of retail investments for Australasia Simon Rooney said there was an “ongoing and increasing trend” for major retail owners to divest part-shares in their assets, as they could retain the valuable management rights and a strategic interest long-term.

The strategy also enables groups to unlock capital for redeployment into alternative opportunities and diversify their portfolios.

“The attraction of these joint ventures for investors is the opportunity to partner with leading specialist managers to leverage their scale, resources and knowledge, particularly in retail where the sector requires intensive and expert management to extract the maximum value in the current ­environment,” Mr Rooney said.

Offshore groups remain very active shopping centre buyers and picked up $1.4bn worth of assets last year. JLL cited Australia’s solid economic fundamentals as attractive for offshore players with core mandates to invest in the Asia Pacific.

Last month Victoria’s planning tribunal ordered Vicinity to pay a local council in Melbourne’s east a one-off multi-million-dollar fee after failing to account for public open space charges when it sold off the development rights above The Glen, a premium 59,000-square-metre mall in Melbourne’s eastern suburbs it co-owns with the Perron Group.

Vicinity owns $16.1 billion of retail assets and manages some $26.1 billion in assets across the full retail asset spectrum.