ASX-listed Irongate has partnered with property platform Fortius to take out Rundle Place, a prime shopping destination in the heart of Adelaide’s CBD, for about $210 million, in one of the biggest single retail deals since the pandemic disruption.
On the sell side is deep-pocketed private equity giant Blackstone, which acquired both the shopping centre on Rundle Mall and an office tower above it in a $400 million transaction five years ago. The office component was sold three years ago to Centuria, in partnership with Rich Lister Paul Lederer, for $185 million.
The deal, struck on a passing yield in the mid-5 per cent range, was first mooted by Fortius last year before being finalised this month, after Irongate, the rebranded Investec Australia Property Fund, came in as well. Irongate’s anchor support comes through an unlisted vehicle it manages, the Irongate Templewater Australia Property Fund, an Australian and New Zealand-focused real estate opportunity fund.
Completion of a deal of such scale will be closely noted by the retail investment market, which took a battering during COVID-19 as shoppers stayed home, revenues and rents fell and property values were written down.
As part of the overall acquisition, Fortius has secured the adjoining Grenfell Street car park, on a passing income of 5.8 per cent.
“There is resilience in the retail sector and it’s bouncing back quickly, supported by an overwhelming amount of investor interest we havereceived,” Sam Sproats, Fortius chief executive, said.
Graeme Katz, Irongate group chief executive, described Rundle Place, which is home to Adelaide’s only Apple store, the Adelaide City Library, a full line Coles supermarket and more than 50 specialty shops, as a landmark asset.
“Our wholesale funds management program allows us to take advantage of these kind of deep-value opportunities and we look forward to working with Fortius on unlocking further value,” he said.
The transaction, brokered by McVay Real Estate and Knight Frank, comes after a tilting in major investor interest towards industrial real estate, tightening yields in the sector. The higher returns in retail are now catching interest again, according to McVay’s managing director, Sam McVay.
“Last year there was so much uncertainty around what is happening around retail in general and what tenants were going to survive,” he told The Australian Financial Review.
“A lot of tenants have actually got stronger during that period. What we are seeing is the spread in cap rates between industrial and office to retail, which has pushed out so much further. We have got a lot of inbound interest on retail now.”
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