QIC ties up Melbourne homemaker hub in $135m deal
Funds giant QIC has snapped up a homemaker hub in Melbourne’s south-east in a $135 million deal which, it says, will address a stronger appetite for core-plus property after the Your Future, Your Super reforms.
The 25,000-square-metre Craigieburn Junction will be parked in the QIC Active Retail Portfolio Fund, one of two investment funds run under the “core-plus” mantra. The category typically refers to commercial property one notch above blue-chip core real estate, which has the potential for greater returns through added value from improvements.
The mall opened only two years ago, a high-exposure site in Melbourne’s northern growth corridor. The strong tenant mix will provide an income yield of about 5.4 per cent, QIC said, and there were value-add opportunities at the site, which includes a large land component.
“The acquisition of this defensive retail asset showcases QIC’s conviction in the core-plus real estate asset class, and is a fitting addition to QIC’s established, high-quality $1.1 billion core-plus portfolio, consisting of adiversified exposure in defensive retail, industrial and office assets,” said QIC’s fund manager for core-plus strategies, Charles Occhino.
“In the wake of Your Future, Your Super legislation, investor appetite in the core-plus sector has strengthened.
“Given Your Future, Your Super assesses performance against the core real estate benchmark, investors will be rewarded for taking a portion of their investment holdings in a core-plus exposure.”
Also reaping its reward was the mall’s owner, PGIM Real Estate, which took control of the large-format centre in mid-2019 after a $100 million fund-through style deal with its developers, Melbourne-based Oreana Property Group, led by Tony and Steven Sass.
Large-format malls have proven to be among the most resilient of retail assets over the past 18 months and longer, supported by foot traffic and investors as trends in working from home and home renovation accelerated through the disruption.
“Despite various headwinds in the retail sector, we had conviction that this new-age, large format centre with a diversified, and defensive tenant mix would perform well, particularly in this location which is benefiting from strong population growth and government infrastructure,” said Steve Bulloch, managing director and head of Australia for PGIM Real Estate.
“Our decision to sell followed numerous unsolicited offers to purchase the centre, with the final sale price of $135 million reflecting the attractiveness of the asset and the future growth prospects for the precinct.”
Making the sale were JLL’s Nick Willis and Sam Hatcher, in conjunction with Stonebridge’s Justin Dowers, Phil Gartland and Carl Molony.
“There is a growing weight of capital looking to get an allocation to the tightly held large-format sector. Institutional grade centres like Craigieburn Junction are unique in the Australian market, with this being the largest transaction since 2018,” Mr Willis said.
Mr Dowers noted that as large-format retail assets became more widely accepted in the marketplace, new investors were coming into the sector, resulting in tighter yields.
