QIC Global Real Estate, the property arm of Queensland state’s asset management company with A$10 billion ($9.7 billion), plans to buy more U.S. malls after investing in shopping centers in the world’s biggest economy.
The unit of QIC Ltd., based in Brisbane, plans to take advantage of a recovery in consumer sentiment and shopping mall rents to add to its assets in the U.S., said Steven Leigh, managing director of global real estate.
Australia’s QIC yesterday said it had entered into a joint venture with Cleveland-based Forest City Enterprises, paying $435.6 million for a 49 percent equity stake in eight U.S. malls. Retail property vacancies fell 10 basis points to 6.7 percent across the U.S. in the first quarter of 2013, and rents are expected to rise this year across the country, according to data from Chicago-based property broker Jones Lang LaSalle Inc.
“Our focus at the moment is on North America,” Leigh said in a telephone interview yesterday. “There are more buying opportunities in the U.S. than in Australia and the current pricing there is attractive. And we think there are reasonable prospects for income growth.”
The company set up an office in Los Angeles more than a year ago and has six staff members in the U.S. to “scan the landscape and look for potential transactions,” Leigh said. It will increase the number of U.S.-based employees “in time,” he said, declining to provide a time frame.
QIC, which has four property funds, will create a fifth to house the U.S. investments, Leigh said. The transaction marked the group’s first direct property investment in North America, he said.
The companies will renovate four of the malls, in Nevada, Virginia and California, Forest City said in a release yesterday. The rest of the properties are in Pennsylvania, West Virginia and California, the company, which will manage the properties, said.
The equity value of the properties was $900 million, Leigh said. Including debt, the malls were worth a total of $2.05 billion, he said.
Consumer confidence in the U.S. rose in May to the highest level in almost six years, a private gauge showed, as a rising stock market and property values helped lift Americans’ outlook on the economy.
Forest City yesterday reported funds from operations of $53.1 million in the three months to March 31, compared with $89.2 million a year earlier.
QIC’s only other overseas direct property investment is in the Merry Hill shopping center in Birmingham in the U.K., which it owns in partnership with Sydney-based Westfield Group, Leigh said. The group prefers retail properties, which account for more than 80 percent of its real estate investments, he said.
In Australia, QIC will continue to seek acquisitions, Leigh said, adding that it is not currently in talks on any properties.
Australia remains a tenants’ market, with mall landlords needing to offer incentives to maintain occupancies, a survey of shopping center managers conducted in May and released this month by Jones Lang LaSalle showed. Rental growth for specialty stores in malls was 1.2 percent in the 12 months to March 31, from 3.8 percent in the year to Dec. 31, according to the survey.