This article is from the Australian Property Journal archive
SINGAPORE’S SPH REIT has made a foray into Australia, teaming up with Moelis to buy the Figtree Grove shopping centre from Blackstone for $206 million.
SPH will acquire a 85% stake and Moelis which will manage the joint venture vehicle will hold 15%. SPH has paid $175.1 million for its interest.
At the same time, Blackstone has bought a 50% stake in 60 Margaret St Sydney from Hong Kong’s PAG for $800 million.
SPH REIT CEO Susan Leng said this is the trust’s first foray overseas and will enhance SPH REIT’s geographical diversification, with approximately 5.2% exposure, by asset value, in Australia.
She added that it was in line with SPH REIT’s investment strategy to invest in income-producing real estate, which is used primarily for retail purposes in Asia-Pacific.
“We are pleased to announce the acquisition of an established sub-regional shopping centre in Australia with our joint venture partner, Moelis Australia Limited. The acquisition of Figtree Grove shopping centre is a strategic fit with SPH REIT’s portfolio of quality assets and in-line with our strategy to expand our footprint into Australia,” Leng continued.
Moelis Australia managing director and head of real estate asset management Chris Monaghan said the partnership with SPH REIT fits perfectly with its strategy of working with respected and strong offshore investment groups to acquire fundamentally sound investment grade assets with upside potential in the Australian marketplace.
“SPH REIT’s investment requirements aligned well with our strategy of identifying and acquiring strong performing Australian shopping centres with sound trade area demographics and good growth prospects. We very much look forward to our working relationship with SPH REIT on Figtree Grove shopping centre.” Monaghan said.
Figtree Grove is an established sub-regional shopping centre located on 19 & 23 Princes Highway in Wollongong. The 21,984 sqm GLA centre is anchored by a 24-hour Kmart, Coles and Woolworths supermarkets, two mini-majors, with 72 specialty stores, nine kiosks, four ATMs and two external tenancies, one padsite, and 940-lot car park, sitting on a prime land area of 50,900 sqm.
Figtree Grove focuses on non-discretionary shopping with approximately 58.4% of space leased to supermarkets and a discount departmental store. The centre currently boasts an occupancy rate of 98.5%, a weighted average lease expiry of about 5.4 years (by income), and 7.8 years (by GLA), and a well-staggered lease expiry profile.
Figtree Grove is a high productivity shopping centre in Australia, recording total retail sales of A$10,551 per sqm — 47.7% above benchmark for malls in the same category.
This is Blackstone’s second shopping centre sale in less than a month after it offloaded the Waverley Gardens shopping centre in Melbourne for $178 million.
The American private equity giant is selling off its retail investments one at a time after pulling the plug on a $3-4 billion portfolio sale in September last year.
After putting its 10 shopping centres portfolio on the market in April last year, Blackstone withdrew the campaign citing market due to arrival of US giant Amazon, which had spooked many investors.
However, the impact of Amazon on the Australian retail scene was overstated.
A recent report by m3property found despite ongoing negative sentiment, retail property has a stronger risk and return profile than office and industrial assets over the next five years.
“Investors in the sector must ensure that they are investing in dominant centres with active and knowledgeable asset managers. It is the dominant centres that will continue to attract tenant interest, be resilient to change and best placed to introduce entertainment and mixed uses,” m3property director, Shaun O’Sullivan said.
“Retail yields are forecast to soften in the short-term, while fundamentals improve. This should result in sustainable growth in the sector over the medium-term.”
Meanwhile, a case study undertaken in September of overseas retail centres owned by Unibail Rodamco Westfield compared to Australian regional centres showed prime centres down under ranked as having the fourth-highest yield in the selected sample.
O’Sullivan said this makes investing in Australian retail centres an attractive option for overseas investors.
This is the second shopping centre transaction this week after Charter Hall Retail REIT bought Campbellfield Plaza from ISPT for $74 million.
Meanwhile Mirvac confirms it has helped facilitate Blackstone’s 50% acquisition in 60 Margaret St Sydney. Mirvac will retain its existing 50% interest in the office tower, which includes the MetCentre retail precinct. On completion of the transaction, Mirvac will provide junior debt funding of $63 million for a commercial interest rate.
Australian Property Journal
