AUSTRALIA - The sale of four retail outlet centres for $473m (€351m) has signalled a rebound in interest among institutional investors for large retail transactions in Australia, according to Jones Lang LaSalle (JLL).
Colonial First State Property Retail Pty, manager of CFS Retail Property Trust, acquired the assets, which are currently part of Austexx Proprietary’s Direct Factory Outlet portfolio, representing one of the largest retail deals in Australia since the financial crisis.
JLL started marketing the entire Australian DFO portfolio in February, including 13 high-quality assets at nine locations around Australia.
Stuart Crow, head of Asia Pacific capital markets for JLL, said: “The transaction underscores the strong interest in the Australian real estate markets from both domestic and international investors alike.
“It mirrors the trend across Asia Pacific, where a general feeling of stabilisation is contributing to core investors returning to the market and deal sizes getting bigger.”
Simon Rooney, Australian head of retail investments at JLL, who negotiated the deal on behalf of Austexx, said: “The $473m acquisition of four DFO centres by CFX is indicative of a much stronger appetite by local institutional investors and offshore investors for large retail acquisitions.
“This appetite for major retail plays was simply non-existent in 2008 and up until late-2009.”
Rooney said the DFO disposals were the latest in a series of deals that suggested the “investment tide” was turning, including the sale of Lakeside Joondalup earlier this year by ING Retail Property Fund Australia to Lend Lease and the Australia Future Fund for A$475m (€338m).
DEXUS Property Group also sold its 50% interest in Westfield Whitford City to GIC Real Estate for A$256.5m.
Rooney said this “new opportunistic wave of institutional investment” was set to continue, with the Top Ryde City shopping centre in Sydney and a 25% interest in Westfield Doncaster set to be sold for approximately A$700m and $380.3m, respectively, before the end of the year.
“At the peak of the market pre-2008, there were simply not that many opportunities to make major retail investments, and those that did come up were extraordinarily competitive due to looser credit conditions creating many more potential buyers,” he said.
“Opportunities are now arising as many owners are re-focusing their investment strategies and have the confidence to offer larger assets due to an increased potential buyer pool.”
Rooney said local real estate investment trusts had re-emerged as buyers after extensive capital raising over the past two years, while many superannuation funds were also in a position to buy again following the rebalancing of their portfolios.
“But beyond these reasons,” he added, “institutional investors are recognising it is a good time to buy at the highest point in the yield cycle and when competition for available assets is not so intense.”