Colonial First State hauls A$520m for Australia retail fund

The Australian real estate investment manager has raised capital from six domestic and institutional investors for its ‘enhanced core’ retail real estate offering.

The real estate division of Colonial First State Global Asset Management (CFSGAM) has held a first closing for a retail real estate investment fund raised for investments in “sub-regional” and “neighbourhood” shopping centres across Australia.

CFSGAM Property announced it had attracted more than A$520 million (€442.5 million; $547.3 million) from six domestic and institutional investors for its CFSGAM Property Enhanced Retail Fund (CERF). The investors included superannuation and pension funds.

The capital haul exceeds the vehicle's original A$500 million target at the time of the fund's launch in January however fundraising is not finished and a final closing is expected to happen later this year.

The investment mandate for the fund is to put this capital to work in a mix of assets with solid and growing income streams but with potential for value enhancement on the back of active asset management. Through improvements made in areas such as tenant mix, leasing and, where required, redevelopment, the firm expects to generate what it described as ‘enhanced core’ returns –about 11 percent per year after fees.

Accordingly for a vehicle with a core strategy, conservative leverage of between 15 percent and 25 percent loan to value is expected to be used for CERF’s investments.

Typical individual equity outlays are expected to be between A$25 million and A$125 million.

In the announcement on the equity closing, Angus McNaughton, managing director and head of property for CFSGAM, underlined how Australian retail had outperformed the country’s shares and bonds over a 25 year period. He said: “We are now at an optimum point in the cycle to make opportunistic retail acquisitions for our investors.”

McNaughton added: “Wholesale property plays an important part in any well diversified investment portfolio. In this instance, we are providing a small group of like-minded investors with an opportunity to make counter-cyclical acquisitions and benefit from the leverage and scale of CFSGAM Property.”

Pacific Capital is acting as placement agent for CERF.

CFSGAM Property is one of Australia’s largest real estate investment managers with A$18 billion in funds under management. The division operates both private investment funds and publically listed real estate investment trusts in Australia and New Zealand.