Lendlease venture’s offer of Erina Fair could raise $850m and reset its funds empire

The shopping centre sale of the year is kicking off with a huge sum expected to be offered by the new groups dominating buying in the industry.

Lendlease's APPF Retail fund will put its 50 per cent stake in Erina Fair up for sale alongside South Korea’s NPS.

The country’s top property fund managers and offshore capital backers are lining up to bid for the sprawling Erina Fair shopping centre on NSW’s Central Coast with the contest tipped to drive the price beyond $850m.

The race for the centre is heating up after Lendlease’s Australian Prime Property Fund Retail and co-owner South Korea’s National Pension Service tapped agents CBRE’s Simon Rooney and JLL’s Nick Willis and Sam Hatcher to offer the complex.

The sale was in the works after the Lendlease-managed fund last month decided to put up its interest and the centre’s management for sale, alongside the South Korean fund’s interest, which was offered in 2023. The timing of bringing the interests and management together has worked in the vendors’ favour with retail property transactions surging and values heating up on the back of lower interest rates and rising consumer spending.

Syndicators who have made the running in the shopping centres market are likely to be the keenest bidders.

They include Melbourne-based Fawkner which has shown its capacity to acquire large-scale regional centres across Australia, and boost returns when taking on their management.

Others on the starting block are IP Generation, which is buying Sydney’s Top Ryde for more than $500m, and Haben, which won the backing of US manager Hines to buy Sydney’s Westpoint for $900m last year.

Rival listed shopping centre companies are considered less likely to directly make a play for the asset, as they have capital constraints, but could look at the management if they were able to marshal external capital. Those with funds arms are also likely to explore the bidding, as will large superannuation funds.

The groups want Erina Fair due to its large scale, the rarity of regional shopping centre managements and the opportunity for mixed use development. Offshore capital is also targeting NSW assets, partly to avoid the hefty taxation burden of investing in Victoria and Queensland.

While retail property values have stabilised, a sale could equate to around half of Erina Fair’s peak valuation when shopping centres were surging a decade ago before the e-commerce boom. Despite a big reset before and during the coronavirus crisis, investors are back with sales including the Lowy family-backed Assembly Funds Management pairing up with US investment house PGIM Real Estate to buy the Woodgrove Shopping Centre in the western Melbourne suburb of Melton for $440m. Rich Lister Nick Andrianakos also bought a 50 per cent stake in Melbourne’s Northland Shopping Centre from a fund managed by the GPT Group for $385m.

Asian-backed property player JY Group is also active and is in the box seat to pick up a half stake in Bankstown Central in Sydney’s western suburbs for more than $300m.

There is a fresh impetus from such private capital players who are looking to deploy prior to the redemption windows in major funds closing. The need to satisfy exiting investors is one driver of sales. At the same time some large listed players who would normally compete for assets are out of the market. Foreign capital is also alert to the opportunity to back a buyer of Erina Fair as it could redevelop the land-rich centre near the gateway city of Sydney as it deals with a housing crisis. There are already plans for a longer term redevelopment of the site that include residential.

Lendlease is battling to keep the entire $10bn Australian Prime Property Funds empire together as it faces a challenge from rival Mirvac, which is already going for its $2bn industrial fund.

Lendlease is confident it can sell its stake in the asset, recapitalise the retail fund, and pursue a mixed strategy on the remaining shopping centre assets it co-owns.

Erina Fair spans a gross lettable area of more than 113,000sq m and is anchored by Myer, Kmart, Big W, Woolworths, Coles, Aldi, Erina Ice Arena and Hoyts Cinema.

Originally published as Lendlease venture’s offer of Erina Fair could raise $850m and reset its funds empire