Sydney's QVB, Chatswood Chase change hands in $1.1b retail swap
Ownership of premium retail centres in Sydney including the Queen Victoria Building, The Strand and Chatswood Chase have changed in an asset swap between Vicinity Centres and Singapore’s sovereign wealth fund, Government Investment Corp, valued at more than $1 billion.
It is one of the biggest such retail asset swaps and ownership changes in Sydney’s city and will significantly increase Vicinity’s CBD-based retail footprint along the eastern seaboard. In Sydney, the direct exposure to City Centre assets for Vicinity increases from 11 per cent to 15 per cent.
There will also be a remix of some tenants, although all the assets are predominately food based and services, such as mobile phone and accessories vendors, which are the resilient to online shopping.
Overall, Vicinity paid $556 million for the three Sydney city centres and GIC paid $562.3 million for the Chatswood Chase interest. The yields for each transaction was about 5 per cent.
Vicinity’s outgoing chief executive Angus McNaughton, said the two companies had been in discussions for the asset swap “for a number of months” and that it was a “win win” scenario.
“It is a very attractive deal for us and will allow us to enter the strong Sydney CBD retail sector. We have a presence in Melbourne with the Emporium and in the Brisbane city, but we have not been in Sydney. This will add to our earnings and footprint,” he said.
The Strand Arcade, in Sydney’s CBD. Photo: Supplied
“While GIC has done a great job on the assets, we can now add to them with new tenants and a remix of offerings. They were also attractive to us with the new Sydney light rail development which stops in front of them all.”
Known as the “ant track” from Town Hall Station under the QVB and into Scentre Group’s Sydney City Plaza, it is considered the busiest pedestrian path in the country.
“Combined foot traffic through the Sydney CBD Centres is about 60 million people per annum, with visitation from three main, and growing, consumer segments: office workers, tourists and residents, who spent $590 million across the three centres this year,” Mr McNaughton said.
“The Sydney CBD centres perform at very high levels of retail sales productivity, with specialty sales averaging $23,890 per square metre and specialty moving annual turnover (MAT) growth of 2.4 per cent, while overall MAT growth was 4 per cent.”
Michael Vincent, CLSA said, the increased CBD weighting will be more resilient despite structural challenges for Australian retail.
“There will be improved portfolio productivity and MAT growth metrics and will increase Vicinity’s assets under management [and]…will reduce exposure to Chatswood Chase, which we believe is due for a major development in the next 2-3 years.”
Vicinity retains 51 per cent interest in Chatswood Chase as such retains exposure to the potential upside from the development but the presence of GIC as a capital partner helps de-risk the project.
