Lendlease offloads shopping centre Craigieburn Central for $300m amid industry reset

The $300m shopping centre sale in Melbourne shows that investors are back chasing centres, but pricing has shifted.

Lendlease and one of its managed funds have sold off a Melbourne shopping centre in a $300m deal as investors return to the shopping centre market, albeit at lower prices.

The industry has bounced out of the coronavirus crisis and shoppers are back, but values have been hit by higher interest rates and the shift to e-commerce.

Lendlease’s Australian Prime Property Fund Retail and co-owner Lendlease exchanged contracts on the sale of Craigieburn Central to property funds house IP Generation for a gross price of $300m.

IP Generation is one of the most active investors in the Australian retail market, having acquired about $1bn in shopping centres since 2021 as larger institutions sell down.

In its latest play, it set up a trust that will hold the Melbourne asset and spin off an 8 per cent annualised yield, with additional returns to come from value-add plays. Other acquisitions include its recent purchase of an AMP fund’s 50 per cent stake in Western Australia’s Rockingham Centre for $180m.

Developed by Lendlease and opened in 2013, Craigieburn Central is in one of Melbourne’s fastest growing regions and comprises about 157 specialty stores, together with a range of major retailers and entertainment offers, as well as bulky goods and commercial tenants

Craigieburn Central has long been a sought-after asset due to its location in a growing catchment area, mix of quality tenants and value-add potential.

Craigieburn Central Shopping Centre in Melbourne. Picture: Josie Hayden

APPF Retail held a 75 per cent interest in the centre, with Lendlease holding a 25 per cent interest.

Simon Rooney, CBRE’s head of retail capital markets, Pacific, negotiated the sale on behalf of the vendors, representing the largest retail transaction in Victoria since 2018 and nationally since December 2021.

The deal represents the most competitive outcome for a regional shopping centre since the sale of the Grand Plaza Shopping Centre in Brisbane, which Invesco sold to EG Funds in early 2022.

“The sale was a highly competitive pricing outcome for APPF Retail and Lendlease, simply reflective of the attractive inherent, long term and deep value fundamentals Craigieburn Central offers, valued accordingly by proactive private capital that dominates the retail investment landscape across Australia at present,” Mr Rooney said.

CBRE is bullish about a recovery, even as discretionary spending may be hit by an economic slowdown.

“The retail sector is set to benefit from migration, resilient spend in the face of already high interest rates and very low new supply in the market after a period of under-investment in the sector,” he said.

Investors are 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 disposal was also in keeping with the Lendlease-run trust’s sales program, partly aimed at satisfying investor redemptions, and shows retail property is coming through the pain and that assets with a resilient underlying performance will again be chased.

APPF Retail fund manager Anne MacSporran said the trust was “repositioning” its shopping centre portfolio of prime quality assets to take advantage of changing consumer demands and urban growth opportunities.

“The fund is focused on investing in and creating multipurpose, mixed use centres, catering to multiple aspects of customers’ lives. By unlocking the value of surplus land surrounding our assets to deliver development opportunities, we aim to further activate our retail centres and deliver resilient, long-term performance for our investors,” she said.