Brisbane-based Queensland Investment Corporation has expanded its international presence with a $US3.17 billion ($4 billion) deal with its joint-venture partner, Forest City Enterprises (FCE), in 10 US regional shopping malls on behalf of a client.
The group declined to comment on the identity of the client, but in 2015, QIC paid $1.1 billion for a 25 per cent stake in the Ala Moana Centre in Hawaii, on behalf of AustralianSuper. Separately, QIC entered the US real estate market by forming a $US2.05 billion joint venture with Forest City in 2013.
Under the latest deal, QIC Global Real Estate, which has a worldwide property portfolio worth $16.5 billion, will take over full ownership and management of the 10 malls, which are located in New York state, Florida and California.
Steve Leigh, managing director of Global Real Estate for QIC, said the group is “extremely pleased to expand our operations in the US and will continue to invest in these quality assets”.
Mr Leigh said the Forest City operational staff will move to QIC and “we are highly confident that we will be able to replicate our strong Australian operating model here in the US”.
“We are building off more than a decade of amassing market intelligence and understanding in the US retail sector. We view the US real estate market, and the retail sector in particular, as a strong investment opportunity,” Mr Leigh said.
“We are encouraged by the broader economic conditions in the US and the resilience of the consumer as demonstrated by continuing strength in the underlying fundamentals for the portfolio. We understand the importance of regional malls to their local communities and have the capability and the capital to evolve these assets into multi-faceted destinations.”
The sale comes as last month, Forest City faced pressure from an activist investor and is considering alternatives to increase shareholder value, including a potential merger or acquisition.
The Cleveland-based real estate investment trust, with $US8.2 billion ($10.2 billion) in assets, will look at a range of options while it continues its current strategies, according to a statement from its head office.
The transaction will be completed in two tranches with the transfer of interests in the first six malls expected to complete by the end of the year, subject to third-party consents.
QIC has $15 billion of retail holdings in Australia, which include the Castle Towers shopping centre in north-western Sydney, Robina Town Centre on the Gold Coast and Eastland in Melbourne.
According to JLL’s 17th Retail Centre Managers’ Survey, undertaken in August across 119 Australian shopping centres, under JLL management, there was a slight improvement in sales growth expectations, with 53 per cent of respondents expecting some sales growth in the year ahead, up from 47 per cent in February 2017.
But most respondents expected growth to be no more than 3 per cent per annum.
Vacancy rates remained below the long-term average of 4.5 per cent reported across the 17 Centre Managers’ Surveys conducted to date.
JLL’s director, strategic consulting, David Snoswell said nationally, consumer sentiment has been weak for an extended period of time.
“The Westpac-Melbourne Institute Survey of Consumer Sentiment has been below the 100 neutral mark between December 2016 and August 2017, dropping to a low point in August of 95.5,” Mr Snoswell said.
“Twenty per cent of respondents to our survey said they expected a decline in sales turnover in the next 12 months and gave a range of reasons for this, including strong competition in the catchment they operate in, the loss of a key tenant and the need for the centre to be refreshed/refurbished.”