Lendlease to make Cairns exit as redemptions bite

A Lendlease-run fund plans to offload the Cairns Central shopping centre and expects to get about $500m.

Cairns Central shopping centre is on the market for about $500m. Picture: Brendan Radke

The shopping centre market is facing its next big test with a Lendlease-run fund looking to offload Cairns Central with a price of about $500m expected.

Big mall trusts are under pressure from investors wanting to redeem at a time when few buyers are in the market. The Lendlease fund has already sold down a series of shopping centres.

The Lendlease fund sold Caneland Central in Mackay, Queensland, to Sentinel Property Group for about $280m last year. It is selling Craigieburn Central, north of Melbourne, to funds house IP Generation for about $300m.

Colliers’ Lachlan MacGillivray and McVay Real Estate’s Sam McVay are now marketing Cairns Central for the Lendlease managed Australian Prime Property Fund Retail.

Home to 186 tenants that underpin its trading performance, Cairns Central is anchored by a Myer, Kmart, Target, Coles, Woolworths and Event Cinemas.

The complex is a lifestyle, entertainment and fashion destination and is one of the country‘s top performers with sales of $492 million per annum.

The centre has a GLA of 51,972 sqm and occupies a landmark 9.4ha site, directly connected to Cairns Railway station.

As well as major tenants, other retailers include City Beach, Daiso, iPlay Australia, Rebel, Best & Less, Terry White Chemmart and JB Hi-Fi.

Mr MacGillivray said that a full interest in a regional shopping centre with management rights was seldom offered to market, with only two sales recorded since 2015. “Cairns Central is the best quality asset to hit the market in recent times against a backdrop of capital refocusing attention on ultra-defensive and dominant assets,” he said.

“Unlike other periods of economic uncertainty, there is no deficiency of capital in the market and quality assets located in strong locations like Cairns Central continue to source high demand,” he added.

With specialty occupancy costs of 12.3 per cent and productivity of $14,122 per square metre, the centre has one of the most secure and defensive income streams in Australia, Mr McVay said.

Domestic visitor numbers to Tropical North Queensland are up 27 per cent compared to pre-Covid and international travellers are only starting to rebound. “As the gateway to Tropical North Queensland, Cairns is poised for a period of exciting growth and Cairns Central will be a major beneficiary of this,” he said.

Credit ratings agency S&P Global in December downgraded the unlisted Lendlease fund over concerns that sagging consumer confidence, as a result of belt tightening by consumers, would weigh this new year.

The fund saw its long-term issuer credit rating cut to “BBB+” from “A-” over it selling assets to satisfy unitholder redemptions – rather than cut debt – and take on a cumulative loss of income-generating properties.