ADIA's $400m push into Federation malls

THE Abu Dhabi Investment Authority is tipped to be embarking on a deal with Federation Centres to purchase stakes in its Australian shopping centres in a transaction worth at least $400 million.

THE Abu Dhabi Investment Authority is tipped to be embarking on a deal with Federation Centres to purchase stakes in its Australian shopping centres in a transaction worth at least $400 million.

It is understood Federation, previously known as Centro, would sell the Middle Eastern sovereign wealth fund stakes in two of its giant retail centres in Sydney, Centro Bankstown and Centro Roselands, which have previously been on the market, and possibly others.

Centro Bankstown and Centro Roselands are worth $575m and $336m respectively, according to the company's accounts.

ADIA has been an active player in the local market recently with the group talking to numerous groups about major deals. It is understood a deal with Federation would be similar to that which the listed shopping centre owner recently struck with Industry Superannuation Property Trust, a source says.

Federation declined to comment yesterday. The recently renamed and recapitalised company, which nearly collapsed at the beginning of the global financial crisis when it was unable to refinance $3.9 billion maturing debt, is moving to offload stakes in its shopping malls as it embarks on a $1.1bn redevelopment program in the next five years.

Chief executive Steven Sewell has said that with more than $1bn in capital raised from the co-ownership deals the group was well placed to grow its business through the redevelopment projects and make further acquisitions of its syndicate properties. So far the listed shopping centre group has undertaken co-ownership deals in eight centres with a gross value of $2.1bn.

The first major deal was announced in May last year, when what was then Centro sold 50 per cent stakes in three of its premium shopping centres to Perth-based billionaire Stan Perron for $690.4m.

This month, Federation announced the well flagged deal with ISPT worth $371.4m.

The deal involved ISPT buying 50 per cent stakes in four sub-regional centres in Mandurah, Western Australia, Cranbourne and Karingal in Victoria and Warriewood in NSW, as well as a convenience centre in Halls Head in Mandurah.

Federation Centres was to remain the manager of the centres half-owned by ISPT.

The shopping centre stakes were sold at a 2.9 per cent premium to the company's June 2012 book value and an average yield of 7.49 per cent.

Federation said on Friday that as a result of the joint-venture deals on some of its centres, its debt levels had fallen to 29.9 per cent and were expected to fall to 24.2 per cent when the deal with ISPT was formally completed in July.

The group posted an interim half-year net profit of $115.9m, just over a year after it was restructured in late 2011.

ADIA has been courting opportunities for property acquisitions in Australia.

Last year, AMP Capital announced that ADIA and the Canada Pension Plan Investment Board poured a collective $872m into one of its funds that owns the Macquarie shopping centre in Sydney and Pacific Fair on the Gold Coast.

The deal was announced in October as part of Westfield Group and AMP Capital's ownership split of seven Australian shopping centres and paves the way for AMP's $970m redevelopment plans at Macquarie and Pacific Fair.

ADIA is also rumoured to be an investor on Lend Lease's planned twin-tower hotel complex as part of its $1.5bn redevelopment at Darling Harbour in Sydney.

Last year, ADIA was said to be in talks to fund and subsequently buy the Anthony John Group's $360m office project at Brisbane's South Bank to house Suncorp's staff.

But the deal did not proceed after Suncorp withdrew its requirements for a new building.