Future Fund selling $850m in shopping centres, after property exposure increase
Australia’s $149 billion Future Fund is selling close to $850 million worth of shopping centres across Australia, looking to make property gains of about 50 per cent in just over seven years.
The Future Fund will sell a 50 per cent share in Lakeside Joondalup regional shopping centre in Perth for about $650 million while a 25 per cent stake in the Harbour Town Gold Coast has already been quietly sold off to Lendlease for $180 million, reflecting a yield of less than 5 per cent.
The Future Fund’s move to sell the centres comes after it published its latest portfolio update showing its exposure to real estate had increased to 7 per cent or about $10.5 billion up from 6.2 per cent or $8.3 billion a year earlier.
When it purchased the centres, its exposure to real estate was a mere 5 per cent or $3.4 billion at the time.
JLL’s head of retail investments, Simon Rooney, has been exclusively appointed on behalf of the Future Fund to sell Lakeside Joondalup, which is Western Australia’s most successful shopping centre with moving annual turnover of $707 million – the highest in the state.
“Demand for core assets, like Lakeside Joondalup, remains strong with over $3 billion worth of regional shopping centres having transacted in the last 12 months,” Mr Rooney said.
Such deals include a half share in Indooroopilly in Queensland worth $800 million, a half share in Westfield Eastgardens in NSW worth $720 million, a half share in Pacific Epping and Pacific Werribee in Victoria at close to $1 billion and a 49 per cent share in Chatswood Chase in NSW for $562.3 million.
“Investors are attracted to the regional asset class given its status as the most defensive retail asset class and offers the highest risk-adjusted returns.
“Regional shopping centres in Perth are tightly held, rarely traded and are highly sought,”
JLL research indicates that the last individual regional centre to transact in Western Australia was a one-third share in Karrinyup Shopping Centre, which UniSuper acquired from Westfield in 2013 for $246.7 million.
Lakeside Joondalup is the state’s second-largest shopping centre, with 99,000 square metres anchored by Myer, Kmart, Big W, Target, Coles, Woolworths, Aldi and Grand Cinemas, together with 12 mini-majors and 283 specialties.
It last traded hands in 2010 when it was sold by the ING Retail Property Fund for $475 million to Lendlease’s APPF Retail and the Future Fund.
Lendlease’s APPF Retail Fund is understood not to have taken a first right of refusal to buy Lakeside Joondalup and instead use a separate first right of refusal to buy the Future Fund’s 25 per cent stake in the 55,225 sq m Harbour Town centre, adding to its own 25 per cent stake. The remaining 50 per cent is owned by the Lewis Land company.
