REIT ASIAPAC
We estimated that there is a
pipeline of A$7 billion worth
of gross development value
adjacent to, or sitting in air
rights above, our shopping
centres. This gives us the
ability to develop a new
line of business around
mixed-use that is likely to be
upwards of 75% in the form
of for-sale residential.
Grant Kelley
CEO & Managing Director,
Vicinity Centres
1. Vicinity has embarked on a fundamental change in its
retail strategy. Please tell us more about your plans
going forward.
The final element is to kickstart our wholesale funds business,
which has lain dormant for a number of years, despite our
predecessor firms such as Colonial having an outstanding track
record for fund managers of their vintage. Our initial fund will be
structured as a joint venture with Keppel Capital. The proposed
fund intends to invest in an initial A$1 billion portfolio of
Australian retail properties owned by Vicinity, and it will benefit
from Keppel’s extensive investor network and Vicinity’s strong
retail capabilities.
By virtue of the company’s history, which was built by
consolidation over several mergers, Vicinity was present at
every level of the retail property portfolio mix. We had small
neighbourhood centres and very large shopping centres. That
strategy worked once upon a time, but now we need to have
scale and focus, and so we had to choose. We could either be
a convenience specialist based in the neighbourhood and sub-
regional centres, or we could be a scalable player with large
retail boxes that average about 50,000 sqm and above. We have
chosen the latter and are in the process of divesting some of our
small neighbourhood centres to partners that specialise in that
business model.
2. Mixed-used developments are common in Asian cities
such as Hong Kong and Singapore due to the scarcity
of land. How do you see the mixed-use opportunity
developing in Australia, where land isn’t an issue.
Australian cities, particularly Sydney and Melbourne, are
becoming denser due to immigration levels burdening the existing
infrastructure. Net overseas migration has averaged more than
200,000 people every year since 2008, and many go to either
Sydney or Melbourne. Each city has tremendous challenges due to
infrastructure which was built 10-15 years ago, or longer. This is
why shopping centres, which are often in locations that are close
to the cities and built on very low plot ratios, will increasingly be
encouraged by governments to look for additional uses. In other
words, there’s a tremendous amount of land or air rights which
are sitting adjacent to or above retail assets, located very close
to the CBD, not being fully utilised. We think there’s significant
upside for mixed-use development as a consequence.
We are recycling the capital from these divestments, into larger
destinations assets with world-class retail, dining, leisure and
entertainment offerings. This forms the first element of our
three-pronged strategy.
The second element is focused on our mixed-used business.
We estimate that there is a pipeline of $7 billion worth of gross
development value adjacent to, or sitting in air rights above, our
shopping centres. This gives us the ability to develop a new line
of business around mixed-use that is likely to be upwards of 75%
in the form of for-sale residential.
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