Hong Kong investor offers $1.5b for malls in Lendlease fund
One of Hong Kong’s largest listed real estate investment trusts, the $HK108 billion ($21.3 billion) Link REIT, has made an offer to Lendlease’s Australian Prime Property Fund Retail for half-stakes in three shopping centres in the $2.8 billion fund.
Sources with knowledge of the proposal told The Australian Financial Review on Thursday the offer from Hong Kong-listed Link was unsolicited and not related to the recent stoush over management rights of the pooled fund that investor Hostplus sought to shift from Lendlease to rival Mirvac.
Lendlease declined to comment and it was not clear on Thursday if the fund would engage with the bid or not.
A turning of the cycle is driving interest in commercial property assets, particularly shopping centres. The MSCI/Mercer Australia Core Wholesale Property Fund Index recorded its strongest quarterly total return in the September quarter since 2022, at 2.0 per cent, with capital growth of 0.9 per cent. Retail funds led all sectors, while office funds posted their first capital uplift in three years.
Foreign investors, particularly, are paying attention. The same MSCI figures show cross-border investment more than doubled from a year ago in the third quarter to $7.1 billion, with overseas investors making up 53 per cent of total quarterly volume, their highest share in five years.
“Australia’s relative stability and improved financing environment are drawing global investors back,” said Ben Martin-Henry, MSCI’s Pacific head of private assets research. “With the cash rate now at 3.6 per cent, cross-border activity is expected to remain strong into 2026.”
The fund is already selling down assets, having last month agreed to sell the 113,000-square-metre Erina Fair shopping centre in Central Coast NSW to syndicator Fawkner Property for $895 million, a little above its book value.
The fund is due to receive redemption requests from investors in a scheduled withdrawal window later this month and it will use the Erina Fair proceeds to pay out those requests. The amount of those request is yet to be confirmed.
But the sale of Erina Fair puts the fund at risk of a potential downgrade, ratings agency S&P Global warned in September, saying it would reduce the scale and diversity of the fund.
“We expect to resolve the CreditWatch when we confirm the amount of redemption requests, divestment of Erina Fair, and application of divestments proceeds,” the agency said.
Link REIT’s offer extends to three of the four remaining assets in the fund, those being its 50 per cent stake in Sunshine Plaza in Queensland, Macarthur Square in NSW and Lakeside Joondalup in Western Australia.
One attraction for investors of existing retail property assets is the lack of new supply coming into the market to support the country’s growing population.
Commercial agency Colliers last month forecast supply of new retail space to decline 72 per cent over the next five years compared with the amount delivered in the five years leading up to the COVID-19 pandemic.
As with residential development, soaring construction costs and elevated borrowing costs have made new projects harder to stack up financially, meaning developers are not starting new projects.
