Lendlease eyes Craigieburn Central offload in $300m-plus play

The shopping centre market is showing signs of life, with Craigieburn Central in Melbourne close to selling for more than $300m.

The shopping centre market is showing signs of life, with Craigieburn Central in Melbourne close to selling for more than $300m as the market resets.

The asset, being sold by the Lendlease-managed Australian Prime Property Fund Retail and its listed manager, is being snapped up by acquisitive funds house IP Generation.

The move comes as greater certainty emerges about the retail recovery, as big players such as Scentre and Vicinity Centres have reported strong sales growth.

Investors are now chasing larger centres, which have not only proved to be resilient during the coronavirus crisis but are now outperforming.

The sale of the high-quality asset in one of Melbourne’s fastest-growing corridors is an indication of the market shift.

The large rich site, owned 75 per cent by the fund and 25 per cent by Lendlease, also comes with the potential to develop the surrounding land.

The disposal is in keeping with the Lendlease-run trust’s sales program, partly aimed at satisfying investor ­redemptions. Credit ratings agency S&P Global downgraded the unlisted vehicle in December, citing concerns that sagging consumer confidence would weigh on its performance this year.

Craigieburn Central Shopping Centre is close to being sold for $300m-plus. Picture: Josie Hayden

S&P also raised Covid-19 disruptions from lockdowns and isolation requirements, which lowered foot traffic at all of APPF Retail’s properties, including Macarthur Square and Lakeside Joondalup. But there has been a strong recovery on the ground since that time, and the shopping centre market is active.

IP Generation has been a big buyer. The group splashed out $185m on a half stake in Westfield Helensvale in South East Queensland in late 2021. It picked up a half stake in Western Australia’s Rockingham Centre for $180m in its most recent shopping centre purchase last month.

CBRE’s Simon Rooney negotiated the off-market sale of the Rockingham stake for the AMP Capital Shopping Centre Fund.

The parties declined to comment on the Craigieburn transaction.

The 64,000sq m centre is on about 25ha in Melbourne’s northern suburbs and sports a Big W, Target, Coles, Woolworths and Aldi, backed by more than 156 specialty stores.

While the metrics of the latest deal are yet to be released, the Rockingham deal was struck on a core capitalisation rate of about 7 per cent.

IP Generation has built a reputation as a reliable purchaser of centres that it then looks to rework away from institutional markets. Its purchasing has come as large institutions and listed players are exiting ­retail holdings.

This trend is expected to continue until interest rates stabilise and the offshore capital that has traditionally played a big role in retail returns, providing further backing for values.

While offices and logistics have yet to take deep valuation cuts, the impending sale shows that retail is coming through the pain and that assets with a resilient underlying performance will again be chased.