Hong Kong’s Link REIT is circling stakes in three trophy Sydney CBD assets – the Queen Victoria Building. the Strand Arcade and The Galeries – in a deal worth around $550 million, in a major vote of confidence in the city’s road map to normality.
It is understood the Hong Kong-listed player is in due diligence to acquire half stakes in all three prime shopping attractions which are held by Singaporean sovereign investor, GIC.
Holding the other half stakes, and giving Link REIT an experienced partner to manage the assets, is ASX-listed Vicinity Centres.
Link REIT’s move will be viewed as a half-a-billion-dollar-plus endorsement of the future of the Sydney’s CBD and its retail trade, coming just days after Premier Gladys Berejiklian laid a reopening plan for the city which, by December 1, will allow the unvaccinated the same freedoms as the inoculated.
Adding further confidence to the retail property market and its investors, the mooted deal has been struck at a rate in line with the assets’ most recent book values recorded by Vicinity. The blended yield across the three half stakes comes out around 5 per cent, setting a clear benchmark on pricing.
For Link REIT, the investment represents its 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.
On the sell side is GIC, which quietly tapped CBRE and Colliers to seek interest in its stakes in the three CBD assets in March this year. The Singaporean powerhouse had acquired those stakes in 2003, as part of its acquisition of local property outfit Ipoh.
GIC 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.