Turi Condon, Property editor | April 09, 2008
THE Commonwealth Bank is making its first property play in Asia, gambling on the rise of eastern affluence by partnering with property giant Jones Lang LaSalle to manage upmarket shopping centres in the region.
The move is a precursor to the bank's Colonial First State arm launching an Asian property funds management business, according to Colonial's head oflisted property, Darren Steinberg.
But no move into funds management in the region was likely for at least 12 months, said Colonial's head of property and alternative investments, James O'Leary.
Though there was no agreement, funds management may also be in joint venture with JLL, which has $15 billion in funds under management in Asia through LaSalle, the investment management unit, the partners said.
The 50-50 joint venture, Sandalwood, will take over the management of 45 shopping centres currently overseen by JLL, and one by Colonial.
The management of another 20 malls was under negotiation, according to JLL Asia-Pacific chief executive Peter Barge.
"It will make us the largest operator in Asia by a long way," Mr Barge said.
The partners said rising Asian affluence was creating opportunities for upmarket retailing.
But there were also business opportunities in the workout of troubled centres for local developers who rushed into the market ahead of the credit crisis.
Mr Barge said 1000 malls were expected to be developed in Asia between 2006 and 2012.
"In China, 450 malls are under construction. Many will get into trouble, and need redesigning, repositioning or to find an equity injection," he said.
Under the joint venture, JLL will provide the shopping centre management expertise and local contacts and Colonial, the development, asset management and strategic leasing expertise.
For Colonial, it is an instant toehold in the region's property market.
Colonial recently won its first Asian management for a centre at Ningbo near Shanghai, but that took 12 months of negotiations and the owner looking at Colonial's Australian managed centres, Mr Steinberg said.
In Australia, Colonial is in partnership with giant Singapore government investor GIC Real Estate, buying the Myer store in the Melbourne CBD for $600 million last year and planning a $500 million redevelopment.