Future Fund to check out of Perth shopping centre in $420m exit

The sovereign fund was once one of the nation’s top commercial property investors, but has been selling retail property as other big players return.

Lakeside Joondalup.

Australia’s sovereign wealth fund has struck an agreement to sell off a half-interest in a major Perth mall for about $420m, with listed company Vicinity Centres bumping aside rivals to go into due diligence to buy the stake.

In a move which confirms shopping centre values have been reset, Vicinity is in talks to purchase the holding in the landmark Lakeside Joondalup Shopping Centre property, which would be one of the largest mall assets to shift in this property cycle.

Trading in shopping centres is holding up, despite interest rate hikes, and the operations of large malls are now getting back to a more normal pattern after periods of faster growth coming out of the pandemic.

The sovereign wealth fund is offloading a half-interest in Lakeside Joondalup.

The Future Fund had long sought to dispose of its half-stake in the sprawling Perth centre, having to weather the dramatic fall in values during the coronavirus crisis which ripped through the sector.

Shopping centres are seeing a big shift as big players — led by Vicinity and rival Scentre Group — are now back in the market, buying large centres as they believe the market is past its worst.

Other groups, including Dexus and funds house IP Generation, are also believed to have chased the Perth mall.

Vicinity has been selling off smaller centres — many in Western Australia — as it looks to switch focus to premium assets and redevelops its largest holdings, including Melbourne’s Chadstone shopping centre and Sydney’s Chatswood Chase.

The sale of the stake is being handled by CBRE’s Simon Rooney, but the parties and agent declined to comment.

The mall is co-owned by the Lendlease-managed Australian Prime Property Fund Retail, with the vehicle set to remain invested in the centre.

Lakeside Joondalup is a near-100,000 sqm mall and anchor tenants include Myer, Kmart, Big W, Target, Coles, Woolworths and Aldi, as well as Hoyts cinemas. There are close to 20 mini majors and more than 260 speciality stores and kiosks.

The centre has been performing well, partly on the back of the resource-heavy WA economy and growth in Perth’s northern suburbs.

The transaction is another sign top institutions are back chasing assets at the premium end of the shopping centre market, with the tide turning when Westfield owner Scentre Group last month teamed up with investment bank Barrenjoey to take a half-stake in Adelaide’s Westfield Tea Tree Plaza.

The Perth retail complex offers opportunities for Vicinity to both expand the large-scale regional mall as well as capitalise on its mixed-use potential in keeping with its model of proposing towers around its major properties.

The sovereign wealth fund was once a big direct property owner and took half-stakes in office towers and shopping centres around Australia. But, much of its local retail property portfolio has been sold off.

Last year, Hong Kong-based private equity and real estate house PAG teamed with local funds house Fawkner to acquire the Midland Gate shopping centre in Perth for about $465m.

It was sold by a mandate client and an unlisted partnership run by Vicinity backed by the Future Fund and Canada Pension Plan Investment Board.

They in 2017 sold their 50 per cent stake in the Rockingham Shopping Centre in Perth to AMP Capital for about $300m. A year later they also sold off a 50 per cent stake in the Grand Plaza shopping centre in Brisbane to US fund manager Invesco for $215m.

Vicinity could seek to pursue a mixed-use development, with master planning already undertaken for the near 24ha site.

It has the capacity to house an entertainment, leisure and lifestyle precinct, and offices or a hotel — in line with the group’s projects at Chadstone.

Despite the dramatic fall in the values of large malls, there has been a swing back in sentiment as the fresh deals being struck have reset the market at lower levels.

Originally developed by ING Real Estate and opened in 1994, the Perth centre has had three major expansions and could be repositioned. It was sold in 2010 by the ING ­Retail Property Fund for $475m to the Future Fund and the Lendlease fund, and they undertook a $330m redevelopment.

Other big sales of note include funds house Fawkner buying the Cairns Central complex in Far North Queensland for $390m last December, with the regional mall selling after two earlier bids fell away when interest rates were rising.