Part owner selling stakes in three Sydney shopping landmarks
Three of the country’s best-loved shopping centres – Sydney’s Queen Victoria Building, The Galeries and the Strand Arcade – have been put into play by Singapore’s sovereign wealth fund GIC which is expecting more than $550 million for its half stake in the properties.
The sale comes at a crucial time for city economies and will also be a test for the recovery of retail assets as workers return to central business districts.
The trio of assets are back in recovery mode after being slugged during the coronavirus crisis and luxury retailers are still keen to take up city stores in the unique properties.
GIC has been one of the most active property traders in Australia during the coronavirus crisis, bulking up its office holdings and backing the takeover of a $2.5 billion healthcare property trust, and is looking to lighten its retail exposure.
But both Vicinity Centres – which co-owns the centres and is not interested in buying GIC interest – and the rival Scentre group, owner of the local Westfield empire, have called out the present weakness of their city properties.
GIC is partly relying on the rarity of such properties and their landmark nature to draw buyers both locally and from offshore.
The Strand Arcade connects Sydney’s Pitt and George Streets. Picture: Gaye Gerard
Big funds are willing to pay a premium for city assets. Five years ago, superannuation fund-backed investor ISPT acquired a half interest in Sydney’s World Square Shopping Centre for more than $280 million.
During the crisis some assets changed hands in Melbourne with Newmark Capital picking up the David Jones menswear store on Bourke Street for $121 million and Vantage Capital, with the backing. Credit Suisse, buying St Collins Lane mall.
Both were repositioning plays and the central Sydney centres are pitched as being different from large regional malls in the suburbs which have struggled to draw back in customers despite being promoted as lifestyle destinations.
The properties are being sold via real estate agencies Colliers International and CBRE. They be may sold in one line or broken up, and they offer exposure to classic strips like Pitt Street Mall, that ranks among the world‘s most expensive strips, and George Street, which has been transformed by the light rail.
In 2017, listed landlord Vicinity Centres and GIC agreed to swap assets worth a combined $1.1 billion, which cut the Singaporean fund’s exposure to the city assets.
The groups exchanged a 49% stake in Vicinity’s Chatswood Chase in Sydney, worth $562.3 million, for a 50% stake in GIC’s Queen Victoria Building, The Galeries and The Strand Arcade, worth $556 million.
That swap allowed Vicinity to gain exposure to the Sydney CBD centres and it will stay on as manager of the Sydney CBD centres as part of the latest deal.
GIC and Vicinity have close ties and the two groups have partnered on Emporium Melbourne and Myer Bourke Street.
This article first appeared on www.theaustralian.com.au/business/property.
