GIC and Vicinity swap stakes in Sydney shopping malls worth AUD1.1bn

GIC and Vicinity Centres have swapped stakes in Australian shopping centres in a deal valued at AUD1.1bn (€725m).

The Singapore sovereign wealth fund has taken a 49% stake in Vicinity’s Chatswood Chase in Sydney for AUD562m. In exchange, Vicinity will take a 50% stake in three malls in the city – Queen Victoria Building (QVB), The Galeries and The Strand Arcade – worth AUD556m.

Michael O’Brien, CIO at listed retail property specialist Vicinity, said the idea of an asset swap arose during a routine discussion several months ago. “We realised this would be a deal that would work well for both of us,” he said.

O’Brien said the exchange gives GIC a presence in the affluent North Shore suburb, while giving Vicinity, which has a greater presence in Melbourne, access to more Sydney assets.

Lee Kok Sun, GIC Real Estate’s CIO, said: “This swap transaction for a stake in Chatswood Chase Sydney, a high quality major regional shopping centre with resilient cash-flows, allows us to gain access to new development and enhancement opportunities.”

Vicinity will continue to manage Chatswood Chase Sydney and will assume property management of the Sydney CBD centres upon settlement of the transaction, expected in early 2018.

A subsidiary of GIC has managed the QVB, The Strand Arcade and The Galeries since the Singapore sovereign wealth took control of the assets in the 1990s.

“These are terrific assets generating high-quality sales growth,” said O’Brien, adding that the Sydney CBD shopping malls benefit from growth in tourism and transformation of the city centre due to new transport infrastructure and increasing residential development.

“Regardless of the growth of online retailing, these centres have traded – and will continue to trade – strongly.” O’Brien said average revenue generated by these centres is AUD24,000 per sqm. “These are irreplaceable assets,” he said.

GIC’s other suburban shopping mall in the city is Westfield Parramatta in Sydney’s West, in which it holds a 50% stake in joint venture with the Scentre Group.

Lee said GIC has previously co-invested with Vicinity. They jointly own two Melbourne malls, Emporium Melbourne and Myer Bourke Street.

The deal is subject to approvals by Sydney City Council, RailCorp and Australia’s Foreign Investment Review Board.