- Portfolio comprises three centres - QVB, The Strand Arcade, The Galeries
- Acquired by Link REIT alongside Australian investment manager EG Funds
- Offered to public market for first time, campaigned by CBRE and Colliers International
Link REIT has acquired a 50% interest in an iconic Sydney retail portfolio for $538.2 million, as the most valuable CBD retail centre transaction since late 2017.
The Hong Kong based investment trust and its Australian investment manager, EG Funds, came to an agreement with Singaporean sovereign wealth fund GIC and acquired the portfolio share at a core capitalisation rate of 5%.
The deal was negotiated by Simon Rooney, CBRE‘s Head of Retail Capital Markets for the Pacific, who campaigned the portfolio alongside Lachlan MacGillivray of Colliers International.
Iconic Sydney retail centres
The portfolio includes the Queen Victoria Building (QVB), a heritage-listed architectural landmark located on George Street, which opened in 1898 and comprises hundreds of fashion, homewares and jewellery retailers alongside eateries.
The sale also included other well-known locations The Strand Arcade, a Victorian-style arcade accommodating premium designer retailers, and The Galeries, a hotspot for fashion, art and dining.
In 2017, Vicinity Centres acquired the same portfolio for an equal 50% interest for $556.0 million, in joint ownership with GIC.
At the time, the portfolio contained 311 retailers which has since grown to 334, spanning 34,877sqm.
A revitalised CBD
Mr Rooney said the current acquisition by Link REIT and EG Funds reflects increasing demand and sustained investor confidence in the CBD area and its central retail assets.
Mr Rooney added that the campaign represented the first time the portfolio was ever presented to a public market, and said the sale of property as large-scale and reputable as this are rarely seen.
“These iconic centres are regarded as among the best in Australia and dominate Sydney’s core retail precinct, which is positioned for recovery following the end of lockdowns, as workers, tourists and shoppers return to the CBD.”
Simon Rooney, CBRE Head of Retail Capital Markets
Nicholas Allen, Chairman of Link REIT, expressed the group’s excitement at the opportunity to invest in one of Australia’s most celebrated retail assets.
“The acquisition of this prime retail portfolio is part of our Vision 2025 growth strategy to diversify and improve our portfolio mix,” Mr Allen said..
The sale represents the latest Australian investment by Link REIT, and the group is said to be seeking further investment alongside EG Funds, with which an open-ended mandate is in place.
Two years prior, Link REIT first diversified from the Hong Kong and Chinese markets with the $683 million acquisition of an office tower located at 100 Market Street in Sydney.
Retail investment soaring
The QVB and co. acquisition is likely to provide excellent returns for the group, the retail portfolio returning a $613 million moving annual turnover (MAT) in the beginning of last year.
The Strand Arcade and QVB are ranked 1st and 2nd respectively in total MAT nationally. As for The Galeries, the popular shopping centre comes in 4th place for total specialty MAT across Australia.
The retail centres are located in Sydney’s most populous residential area, trading to over 3.8 million people and Australia’s largest CBD workforce of 168,460.
The tenant occupancy measured in October was 94.3%, with 46.1% of these tenants being exclusive to the area as the only store in Sydney’s CBD.
According to data from CBRE, investment in Australian retail has surged by 118% over the past year, pushing ahead of increases in the office and industrial sectors.
Investments totaled $4.52 billion over Q2 and Q4 and is showing no signs of slowing into Q4.
