QIC forms $2bn US malls JV with Forest City

The real estate arm of the Queensland government-owned investment firm has bought a 49 percent stake in a portfolio of eight US malls currently owned by Forest City.

Queensland Investment Corporation Global Real Estate (QIC GRE), the real estate arm of the Queensland, Australia government-owned investment firm, has made its first direct US real estate investment by forming a joint venture to invest in a $2 billion portfolio of eight malls, according to a firm statement.

QIC GRE will be buying a 49 percent stake in the portfolio, which currently is owned by Forest City Enterprises, for a total investment of $900 million, according to Steven Leigh, managing director of QIC GRE. Roughly $436 million of that investment will be an equity injection, while the remainder will come through the assumption of existing debt on the portfolio.

Forest City will be the joint venture’s managing partner and will continue to be responsible for operating, marketing, leasing and developing the assets. However, QIC GRE will have equal control in the joint venture, with board seats and veto rights, Leigh told PERE.

QIC GRE chose to form its first US joint venture with Forest City because of the firm’s 50-year history in US real estate, Leigh explained. The Cleveland-based developer built most of the eight malls in the portfolio and has operated them from the beginning. Forest City could not be reached for comment by press time, but it is understood that the QIC GRE investment is part of a refinancing of the firm’s balance sheets.

Preliminary priorities for the joint venture will be the renovation and/or expansion of four of the properties: Galleria at Sunset in Henderson, Nevada; Antelope Valley Mall in Palmdale, California; Short Pump Town Center in Richmond, Virginia; and South Bay Galleria in Redondo Beach, California. The other properties in the portfolio are Victoria Gardens in Rancho Cucamonga, California; Charleston Town Center in Charleston, West Virginia; Mall at Robinson near Pittsburgh; and Promenade in Temecula, California. According to Leigh, the portfolio has an average occupancy rate of 95 percent and average productivity of $500 per square foot.

To complete this transaction, QIC GRE has formed a brand-new open-ended fund, which does not yet have a name. The firm has four other open-ended real estate funds raised entirely from Australian institutional investors, including sovereign wealth funds and superannuations, Leigh noted.

In total, QIC GRE has $10 billion in real estate assets under management – and when this deal is completed, it will be $11 billion, Leigh noted. The joint venture will comprise half of the firm’s $2 billion invested in overseas real estate, with the remaining $1 billion in UK assets.