John Gandel knows the CFS Retail business well, with the trust formed in 2002 from the merger of Gandel Retail Trust with Colonial First State Property Trust. Source: Supplied
MELBOURNE magnate John Gandel is set to emerge with a $1 billion stake in rebirthed shopping centre landlord CFS Retail Property Trust Group, signalling a vote of confidence in Australia’s fragile retail sector.
Added to Gandel Group’s half share in Melbourne’s massive Chadstone Shopping Centre, which is jointly owned by CFS Retail, it will be his biggest single investment, Mr Gandel told The Australian.
Gandel Group owns 16.8 per cent of CFS Retail and has an option over CBA’s 10 per cent stake in the trust.
Last week, the bank struck a deal to cut ties with the $5.4bn CFS Retail, selling the management rights to the fund for $460 million. Under the deal, which goes to a unitholder vote in March, CFS Retail will be renamed and will run $13.9bn of real estate, including CBA’s wholesale property funds business.
“It’s a deal that suits all parties and I believe it’s in the interests of all shareholders,” Mr Gandel said.
Gandel Group would have two seats on the reconstituted trust’s board. He declined to name the appointments. “They will be highly experienced property people that have been involved with us for a long time,” he said.
Commonwealth Managed Investments directors James Kropp, Nancy Milne and chairman Richard Haddock will be directors along with the new managing director, Angus McNaughton. The new trust will have 850 professional staff.
Mr Gandel acknowledged his investment was a big bet on the future health of the retail sector.
“There is always some threat on the horizon, but if we thought retail was finished, we wouldn’t be putting so much money in,” he said.
Retailing had become increasingly sophisticated, he said. “It’s a game for professionals. It’s not a game for amateurs. When it’s internalised, we think the business will perform a little better than in the past.”
Mr Gandel believes the strategy and direction of the trust do not need an overhaul.
“I don’t see anything that needs to be turned upside down,” he said. But he noted this would be subject to board and management decisions. He also saw no reason to sell assets.
“There is no need for a grand sell-off. They have already sold one property and two or three are on the market,” Mr Gandel said.
The trust had raised sufficient capital through the placement; Gandel Group took up its full allocation in the raising, he said.
CFS Retail last week tapped the market for $280m cash through an institutional placement by UBS that was over-subscribed.
Gandel Group will vote in favour of the internalisation provided there is no better proposal.
Mr Gandel said he was not aware of any other possible bid for CFS. “We (Gandel) don’t know of anything else at all,” he said.
But when CBA announced in July that it would sell out of its $20bn real estate business, investment bankers beat a path to Gandel Group’s door.
“Before this situation (internalisation) we were approached by nearly every major REIT (real estate investment trust) to participate in something with Gandel,” Mr Gandel said.
He argues some of the criticism of the deal is misplaced.
“It took a little longer than expected due to all the technicalities, and the bank and the RE’s (responsible entity’s) intention to do the right thing by all shareholders,” he said.
There had been speculation that with Mr Gandel’s stake, the trust’s HQ would move to Melbourne, if the deal was approved by unitholders.
But Mr Gandel said he believed there would always be a substantial presence in both cities.
He knows the CFS Retail business well, with the trust formed in 2002 from the merger of Gandel Retail Trust with Colonial First State Property Trust.
Source: The Australian
