Link Reit buys three prime shopping centres in Sydney as Australia relaxes Covid-19 curbs

·4-min read

Link Reit has invested in three retail properties in Sydney, in a diversification move after Asia’s largest real investment trust reported its second-worst annual revenue growth.

The Hong Kong-based company paid A$538.2 million (US$398 million) for 50 per cent of a trio of assets comprising the Queen Victoria Building (QVB), the Strand Arcade and The Galeries in Sydney, according to a statement released late on Sunday.

“The acquisition of this prime retail portfolio is part of our Vision 2025 growth strategy to diversify and improve our portfolio mix,” Link’s chairman Nicholas Allen said. “We are excited to have captured an opportune moment to invest in these iconic Australian retail assets.”

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The diversification followed a 0.2 per cent rise in Link’s fiscal 2021 revenue for the 12 months ended in March, which grew to HK$10.74 billion (US$1.38 billion), the smallest annual increase since 2019, according to Refinitiv’s data. Australia offers an attractive investment opportunity for Link, as the government gradually relaxes Covid-19 travel restrictions and opens the nation’s borders to international travellers after inoculating 80 per cent of the adult population, a policy which may spur “sales and leasing activity in the hospitality, large-format retail and defensive industrial segments,” according to Colliers.

A view of the interior of the Strand Arcade in Sydney on Monday, October 11, 2021. Photo: Bloomberg.
A view of the interior of the Strand Arcade in Sydney on Monday, October 11, 2021. Photo: Bloomberg.

“The rare portfolio, sitting in the heart of Sydney CBD, was offered to the market for the first time,” said Link’s chief executive George Hongchoy. “Given the high occupancy rate filled with leading Australian and international brands, the portfolio is well-positioned to capture the retail rebound with the improving consumption sentiment in the country. Coupled with the strategic partnership with a leading retail asset manager in Australia, we believe both parties will jointly enhance the portfolio to ensure these landmark assets will deliver the best retail experience to all shoppers and unlock their long-term growth potential.”

The Australian government is allowing citizens to travel abroad without requiring permission, while skilled workers and international students are poised to be allowed to enter the country by the end of the year. The relaxation of the curbs is providing optimism to Australian property market, Colliers said,

The interior of the Queen Victoria Building (QVB), featuring the Great Australian Clock, one of two mechanical clocks that make up the central attractions in the building. Photo: Shutterstock.
The interior of the Queen Victoria Building (QVB), featuring the Great Australian Clock, one of two mechanical clocks that make up the central attractions in the building. Photo: Shutterstock.

“With the path out of Covid-19 restrictions announced in Australia and a significant easing of control measures to look forward to once vaccination rates reach satisfactory levels, we are seeing a renewed sense of optimism in the market,” said John Marasco, managing director, capital markets and investment services, Australia and New Zealand at Colliers.

The property portfolio had a combined occupancy rate of 94.3 per cent in October, Link said. QVB, a heritage-listed building that was completed in 1898, offers 13,912 square metres (149,747 square feet) of gross lettable area across four floors, featuring such retailers as Coach and Bally. It is the second-most visited landmark in the city after the Sydney Opera House.

The Strand Arcade, another heritage-listed retail arcade built in 1892, offers 5,723 square metres of gross lettable area across three floors. The Galeries is positioned as a lifestyle and cultural destination for fashion, art and dining.

The Strand and the QVB ranked the first and second in terms of retail sales in Australia last year, Link said.

The acquisition, scheduled for completion in the first half of 2022, will be fully funded through its cash resources and debt facilities. Upon completion, Link’s ratio of debt to total assets will increase from 20.1 per cent to 21.4 per cent.

Prior to the acquisition of the Sydney assets, Link Reit’s latest purchases were the Happy Valley Shopping Mall in Guangzhou, China in June and a 50 per cent interest in Shanghai Qibao Vanke Plaza in Shanghai in February. In the last financial year, Link Reit bought two office buildings – 100 Market Street in Sydney and The Cabot in London.

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