Charter Hall Fund Buys Three Australia Shopping Centres From LaSalle for $254M

A Charter Hall fund has acquired three sub-regional shopping centres in Australia from LaSalle Investment Management for a total of A$360 million ($254.3 million).

The portfolio of so-called convenience-based assets, anchored by non-discretionary retailers, comprises Bonnyrigg Plaza in Sydney, Morayfield Supercentre in Brisbane and Summerhill Shopping Centre in Melbourne. The portfolio is 100 percent occupied, with key tenants including Coles, Woolworths, Aldi, Kmart and Big W.

The buy translates to a year-one yield of 5.74 percent and boosts the gross asset value of the Charter Hall Convenience Retail Fund to more than A$3 billion, according to the Sydney-based firm. Charter Hall is seeing an acceleration of investor interest across its retail platform, said retail CEO Ben Ellis.

“Limited new supply of retail assets, coupled with Australia’s population growth will continue to drive increasing sales productivity of our tenants driving income growth,” Ellis said in a release.

Eight-Year Milestone

The off-market deal was brokered by JLL’s Sam Hatcher and Nick Willis, who described it as Australia’s largest 100 percent retail portfolio sale in eight years.

JLL has flagged sub-regional centres as some of the most sought-after assets amid a renewed influx of institutional capital into the retail sector, due to their defensive income and promising growth prospects.

“For the first time in over 15 years retail is the most traded asset class in Australia, underscoring deepening liquidity and market confidence,” said Hatcher, head of retail at JLL Australia and New Zealand.

With 88 percent of income anchored by majors, food, health and services, the newly traded portfolio offers stable, resilient cash flows and a risk-adjusted balance between income security and growth, according to the property services firm.

“The sub-regional sector has been the most liquid over the past three years, however, investment supply is now at a shortage with volumes down some 32 percent year to date,” said Willis, executive director at JLL Australia and New Zealand. “Conversely, the regional shopping centre market is up 223 percent year on year underscoring the renewed investor confidence in larger centres.”

German Pension Mandate

JLL unit LaSalle divested the trio of shopping centres under a mandate from German pension group BVK, which partnered with the Chicago-based firm over a decade ago on a real estate investment programme.

In 2013, Munich-based BVK awarded LaSalle $693 million for global core real estate investing in direct opportunities across all property types and selected geographies.

The partnership subsequently made Australian retail buys including Brisbane’s Morayfield Supercentre for A$75 million and Melbourne’s Summerhill Shopping Centre for A$85 million, with both deals taking place in 2015.