Link Spends $538m on Stake in Premium Sydney Retail


Hong Kong-based property fund manager Link Asset Management has secured half stakes in three of Sydney’s most prized and best-known inner-city retail destinations just as the retail sector is beginning to show early signs of a strong recovery.

The half stakes equating to a combined $538.2 million are in the Queen Victoria Building, The Galeries and The Strand Arcade.

The property portfolio, which was sold by Singaporean sovereign fund GIC, currently boasts 94.3 per cent occupancy with the Strand Arcade and QVB ranked first and second in Australia and the Galeries ranked fourth in specialty trading. CBRE and Colliers represented GIC.

GIC bought the trio of retail assets in 2003 as part of its acquisition of local property outfit Ipoh Pty Ltd.

The Singaporean investor held on to the properties until four years ago, when it sold a 50 per cent stake in the trio of buildings for $556 million to Vicinity Centres.

That sale was part of a $1.1-billion asset swap between the pair in late 2017, in which GIC took a 49 per cent stake in the Chatswood Chase retail centre on Sydney’s North Shore in exchange for the 50 per cent stake in its CBD trio.

As part of the deal, Vicinity took over management of the Sydney CBD retail assets.

▲ Link fully fund its new acquisitions through its cash resources and debt facilities. Upon completion, Its ratio of debt to total assets will change from 20.1 per cent to 21.4 per cent.
▲ Link fully fund its new acquisitions through its cash resources and debt facilities. Upon completion, Its ratio of debt to total assets will change from 20.1 per cent to 21.4 per cent.

Vicinity will continue to manage the retail assets while the co-owners look to position the portfolio “dynamically” as city shoppers return.

Link REIT chief executive George Hongchoy said the group jumped at the chance to secure the “rare portfolio” in the heart of the Sydney CBD after they were offered to the market for the first time.

“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,” Hongchoy said.

“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.”

Link REIT chairman Nicholas Allen said the move would diversify the company’s holdings in Australia, where it already owns a Sydney office block.

“The acquisition of this prime retail portfolio is part of our Vision 2025 growth strategy to diversify and improve our portfolio mix,” he said.

“We are excited to have captured an opportune moment to invest in these iconic Australian retail assets.”

The investment is the Link REIT’s first major entry into the retail sector in Australia and follows its $683-million acquisition of an office tower at 100 Market Street from Blackstone two years ago.

Since then, it has been on the hunt for more premium properties in the local market after signing an open-ended mandate with fund manager EG Funds Management.

▲ The Strand Arcade is a heritage-listed retail arcade.
▲ The Strand Arcade is a heritage-listed retail arcade.

EG head of capital transactions Sean Fleming said that the acquisitions would not only benefit Link but also the workers returning to their offices and shops in the Sydney CBD just as the reopening of Australian borders to international visitors nears.

“These prime assets rarely come to market and are well placed to benefit from workers returning to their offices in the Sydney CBD and the reopening of Australian borders to international visitors,” Fleming said.

Retail sales tumbled in the third quarter as Covid lockdowns kept shops shut in Sydney and Melbourne between June and September, though a rebound is now under way as high rates of vaccination allow the economy to reopen.

Recent figures from the Australian Bureau of Statistics showed retail sales fell an inflation-adjusted 4.4 per cent in the third quarter to $85.3 billion, just under market forecasts of a 4.6 per cent decline.

The economy as a whole contracted sharply in the quarter, but shows signs of bouncing back quickly as restrictions lifted with retail trade rising by a stronger than expected 1.3 per cent in September.

Commonwealth Bank senior economist Kristina Clifton said the data had pointed to a sharp bounce in retail sales across NSW as that state emerged from lockdown.

“Our timely CBA household card spending data shows spending has rebounded very quickly in NSW as the lockdown ended,” Clifton said.

“Spending is also lifting in Victoria now restrictions are being wound back. We expect the official data to show a strong rebound in consumer spending in the fourth quarter and through 2022.”

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