Super fund ART is seeking a quarter stake in Westfield Sydney

Australian Retirement Trust has entered due diligence to buy a quarter stake in Westfield Sydney for more than $1bn under one of the country’s largest retail property deals.

Shoppers in Pitt Street Mall outside Westfield Sydney. Picture: Damian Shaw

One of the country’s top super­annuation funds, Australian Retirement Trust, is in due diligence to take a stake in the Westfield Sydney complex in the heart of the central business district with the deal to value the entire property at about $4.4bn.

The move would likely see the fund take a 25 per cent interest in the huge complex in a sign of its confidence in the resurgence in city retail, with the $1bn-plus cheque making it one of the country’s largest ever retail property deals.

A purchase, would also signal that Australian superannuation funds are firmly committed to the nation’s big-ticket retail assets as it follows moves by UniSuper and Cbus Property, which this year took full control of Sydney’s Macquarie Centre for $830m. Other large assets have also been sold by Lendlease funds.

Industry players said that ART had been in off-market talks to buy the interest in Westfield Sydney from the listed Scentre Group, which fully owned the property and operated 44 malls around Australia and NZ. The deal is believed to still be under negotiation as neither party would comment when contacted by The Australian.

Scentre on Thursday noted the paper’ report in relation to a potential transaction concerning an interest in Westfield Sydney.

“As previously disclosed, as part of its ongoing capital management strategy the Group actively engages in discussions with third parties about joint venture opportunities across its shopping centre portfolio. Those discussions may or may not result in new transactions for the Group,” the company said.

It added that if any discussions resulted in any new transaction, it would update the market.

Scentre usually keeps a tight grip on the properties it manages but has more recently flagged it was open to taking on capital partners on its even its best malls, with Westfield Bondi the only property considered off limits.

The Sydney mall partly fronts Pitt St – Australia’s most expensive strip that commands high rents on a global basis – and Scentre has expanded the complex since the Lowy family set the development of the centre in train with canny purchases two decades ago.

A deal would be a sign of confidence in the very top end of the real-estate market and show commercial property is back on the agenda for major superannuation funds, despite them being cautious due to its illiquid nature.

Such a large sale would also indicate this part of the market is all but back to normal after freezing up due to a combination of the coronavirus crisis and higher interest rates.

While values have come down more broadly, the very top end of the market has held up, with Westfield Sydney ranking alongside Melbourne’s massive sprawling Chadstone Shopping Centre as among the best in the nation. Westfield Sydney is best known for a luxury offer that features global fashion icons Chanel, Fendi, Salvatore Ferragamo, Gucci and Miu Miu as well as first-to-market and first-to-Sydney stores; Christian Louboutin, Balenciaga, Fred, Valentino, Loewe, Saint Laurent, Roger Vivier, Dita, Berluti and Chaumet.

The centre also has an extensive line up of Australian designers, including Zimmerman and Kookai.

Scentre teamed up with super fund-backed Cbus Property to buy the historic David Jones Market St building in Sydney’s central business district in a landmark $360m deal in 2016. While the super fund focused on a commercial and luxury residential project, Scentre revamped the retail element and this year Westfield Sydney introduced an additional 6,000sq m of luxury retail space over five levels, including the new Chanel boutique, Moncler and Omega.

Westfield Sydney spans 91,349sq m and has about 266 retailers in total. It drew 33.5 million in annual customer visits and caters to a trade area of more than 5.5 million people – the country’s largest Westfield trade area.

Originally published as Super fund ART is seeking a quarter stake in Westfield Sydney