Hong Kong-listed Link REIT has bought a 50% stake in three retail properties in Sydney from Singapore’s sovereign wealth fund GIC for $538.2 million.
The portfolio includes the Queen Victoria Building, The Strand Arcade and The Galeries, totalling 34,877sqm of gross lettable area and some 334 tenants across Sydney’s CBD.
The deal, which reflects a core cap rate of 5.00%, marks Australia’s largest CBD shopping centre transaction since late 2017, when Vicinity Centres acquired its 50% interest in the same portfolio.
“Given the high occupancy rate filled with leading Australian and international brands, the portfolio is well-positioned to capture the retail rebound with the improving consumption sentiment in the country,” said Link REIT CEO George Hongchoy.
“Coupled with the strategic partnership with a leading retail asset manager in Australia, we believe both parties will jointly enhance the portfolio to ensure these landmark assets will deliver the best retail experience to all shoppers and unlock their long-term growth potential.”
The acquisition is Link’s latest investment in Australia, following its $683 million purchase of Sydney’s 100 Market Street office tower in 2019.
The Queen Victoria Building is recognised as Australia’s largest Victorian Arcade and comprises one of the largest footprints in Sydney’s core retail precinct, while the Strand is the only remaining arcade of its design in the CBD.
At the start of 2020, the centres had a moving annual turnover (MAT) of $613 million and attracted 61 million visitors per year.
In Australia, the Strand Arcade ranks 1st and the QVB ranks 2nd for total MAT, while the Galeries ranks 4th for total specialty MAT.
The deal comes as almost $4.52 billion flowed into Australian retail investments in Q2 and Q3 this year, up 118% on the same period last year, according to CBRE.
That momentum has continued into the fourth quarter, with Vicinity’s $358 million acquisition of a half stake in the Gold Coast’s Harbour Town asset, and UniSuper and Cbus Property’s partnership with AMP Capital to take majority ownership of Pacific Fair on the Gold Coast and a half stake in Sydney’s Macquarie Centre for $2.2 billion.
CBRE Head of Retail Capital Markets – Pacific, Simon Rooney and Colliers International’s Lachlan MacGillivray managed the campaign.
“The Link REIT/EG acquisition is expected to instill further confidence into Australia’s retail investment sector, demonstrating the enhanced institutional demand for core retail assets and the ongoing investor confidence in the future of CBD retailing,” Mr Rooney said.
EG Funds Management is Link REIT’s investment manager in Australia and has been pursuing additional assets as part an open-ended mandate.