Malls back in vogue with $2.2bn deal for Pacific Fair and Macquarie Centre

UniSuper and Cbus Property have taken the majority ownership of Pacific Fair in Queensland, and 50 per cent ownership of Macquarie Centre in Sydney.

Superannuation heavyweights UniSuper and Cbus Property have signalled that malls are back in vogue with a deal to make a $2.2bn investment in the Gold Coast’s Pacific Fair and Sydney’s Macquarie Centre.

The transaction is Australia’s largest ever shopping centre deal and shows that big retail centres are again trading and have avoided dramatic value falls as shoppers return with lockdowns being lifted.

In a fillip for the under-pressure funds manager, AMP Capital unveiled the pair as new partners in the unlisted AMP Capital Retail Trust, which owns an 80 per cent interest in the Gold Coast centre and a half stake in the Sydney landmark.

The ACRT was set up in 2012, backed by international investors the Canada Pension Plan Investment Board and a unit of the Abu Dhabi Investment Authority, who will exit, as will AMP Life Property Fund.

The international groups had wanted out and the fund manager risked losing the management of the centres as a separate minority stake in them was offered by a Dexus-run fund, but it has stitched together a deal that cements its position.

UniSuper is already a big investor with AMP Capital and striking a fresh partnership with Cbus Property, one of the country’s biggest property investors and developers, which specialises in large scale mixed use projects, shows it plans to overhaul the assets.

The deal signals the country‘s top institutions are again on the hunt for top shopping centres as they reflect better value than warehouses and office buildings.

The transaction will show capitalisation rates of about 4.5 per cent on the Macquarie Centre and about 4.75 per cent on Pacific Fair, showing they have stabilised after writedowns during the coronavirus crisis.

The investment caps a period of just over a month in which sentiment towards large scale retail transactions has dramatically turned around and they are now firmly back on the agenda with buyers ranging from Hong Kong’s Link REIT, the listed Vicinity Centres, and local funds managers Haben and Sentinel doing deals.

The oversold sector is coming back globally with the reopening trade likely to benefit listed players like local Westfield owner the Scentre Group as shoppers flock back after a painful period during lockdowns.

The crisis prompted a reset in which landlords stepped up moves to redevelop their malls landmark sites by pursuing new schemes on the sites ranging from residential apartments, build-to-rent apartments to last mile logistics hubs.

The size of the investment shows the belief of large-scale domestic players that these sites can be transformed over coming decades into town centres. The Macquarie Centre has plans in place for 1000 new apartments in four tower blocks in a multi-billion dollar expansion and a masterplan is in place for Pacific Fair.

The deal was handled by the AMP Capital Real Estate team in conjunction with the vendors’ advisers Colliers’ head of retail investment services, Lachlan MacGillivray, as well as Morgan Stanley’s chairman of investment banking, Australia, Tim Church and head of real estate, Australia, Craig Smith.

AMP Capital head of real estate, Kylie O’Connor, said the company would work with UniSuper and Cbus Property as manager of the assets. Since 2012, the fund manager has overseen major redevelopments of both Pacific Fair and Macquarie Centre.

She flagged the significance of the deal for the planned $200bn demerger of AMP Capital’s planned spin off. “As we move closer to operating under the demerged private markets business, we look forward to working with our partners to unlock future opportunities at each asset, both of which are in prime locations within exceptional trade areas,” she said,

Despite the tremors the coronavirus crisis has sent through the sector she said that the best malls were attracting capital. “This deal demonstrates the returning confidence investors have in the retail sector, particularly for high-quality, well managed assets, and the support for our highly regarded and talented management platform,” Ms O’Connor said.

UniSuper head of property and infrastructure, Kent Robbins, said the group was backing quality retail assets. “We anticipate an increase in returns from certain shopping centres as retailers seek exposure to dominant shopping centres, such as Macquarie Centre and Pacific Fair, to leverage their omni-channel retail plans,” he said. He also pointed to the mixed-use development opportunities for both centres.

Cbus Property chief executive Adrian Pozzo said the company was excited to partner with UniSuper and AMP Capital on the premium flagship retail assets located in prime locations, noting the potential for future growth opportunities in both centres.

“This blue-chip retail portfolio complements Cbus Property’s existing premium commercial office portfolio,“ Mr Pozzo said.