The Canada Pension Plan Investment Board paid $482 million for a 50% stake in a shopping mall near Melbourne, Reuters reported Thursday. The Canada Pension Plan will partner with Australia’s Colonial First State Retail Property Trust, which owns the remaining 50% stake, to manage the center. This is the third such deal for CPPIB in recent weeks. In mid-May, the board said that it paid $386 million for a 50% stake in a German shopping and leisure center. At the same time, it bought 36.9% of Mayflower partnership, which owns a portfolio of 13 regional malls located in the United States.
(Reuters) – The Canada Pension Plan Investment Board (CPPIB) has bought a 50 percent stake in a shopping mall near Melbourne for A$455 million ($482 million), property agent Jones Lang LaSalle said, pointing to continuing firm demand for Australian retail assets.
The Canada Pension Plan will partner with Australia’s Colonial First State Retail Property Trust (CFX.AX), which owns the remaining 50 percent stake, to manage the 92,380 sq meter Northland super regional shopping center, Jones Lang LaSalle said.
The purchase prices represents a yield of 6.25 percent, it added.
Despite a strong local dollar, Australia has attracted offshore property investors looking for steady income backed by a resilient economy.
David Green-Morgan, head of Asia Pacific research for DTZ, said office and retail remain the favorite sectors for offshore investors.
“It’s a tightly held market and they are certainly on the investors’ watch list,” said Green-Morgan, noting the yield of 6.25 percent was in line with current market activity.
Australia boasts lucrative retail assets with Sydney, Brisbane and Melbourne among the world’s top 10 most expensive retail rental markets, according to CB Richard Ellis.
Slowing retail sales and growing online shopping, however, have raised concerns about Australia’s retail sector, especially in the listed property market.
But despite these concerns positive signs are emerging and shares of Colonial First State Retail Property Trust rose 5 percent in May on its solid earnings report.
“You still have good household income growth coming through … you still have a savings rate at around a 10 percent level. It’s a good buffer,” Mark Ferguson, AMP Capital Head of Australian REITs. “Those (listed) retail exposure, we believe there are good investment opportunities.”
A mining boom has helped underpin the Australian economy, with growth expected to pick up later in the year after floods hit coal mining caused a contractions in the first quarter.
Data on Thursday also indicated signs that consumer confidence might be recovering with retail sales rising 1.1 percent in April after a drop in March.
(Reporting by Eriko Amaha; Editing by Ed Davies)