Northland mall stake on the block as GPT offer points way to retail recovery

The move to offload a half stake in Melbourne’s Northland shows big ticket retail malls are back in vogue, with the sector defying cost of living pressures to emerge as a steady performer.

GPT’s move with Northland is expected to spark a contest with a mix of local institutions, offshore investors and wealthy developers chasing the interest as shopping centre values stabilise.

GPT’s flagship retail property fund is offering up a half-stake in the $850m Northland Shopping Center in Melbourne in one of the biggest retail plays of the year.

The move is expected to spark a contest with a mix of local institutions, offshore investors and wealthy developers chasing the interest as shopping centre values stabilise.

After years of writedowns and a recent crunch from cost of living pressures, big malls are again being pursued by property investors, partly because they offer more certain returns than the still rocky office sector, with the potential to build apartments around them to address the housing crisis.

The exit by the GPT Wholesale Shopping Centre Fund comes as it looks to remix and diversify its portfolio and focus on centres where it holds the management as it takes a more active approach under new chief executive Russell Proutt. Its flagship office fund has already sold off two office developments in Sydney to a private developer as it repositions.

It has already been active at Northland. In partnership with manager Vicinity Centres, five international mini majors – H&M, Uniqlo, JD Sport, Sephora and TK Maxx – have been opened. The centre’s fashion malls and the outdoor entertainment and dining precinct were upgraded, boosting annual sales to over $660m.

The GPT Wholesale Shopping Centre Fund is sell a 50 per cent interest in Northland Shopping Centre in Melbourne.

Northland is in the city’s gentrifying inner north market, making it one of the most attractive sites for mixed-use projects in coming years. Investors are interested because it is one the first super regional malls to be offered in Melbourne in years. The last transacted stake in a super regional mall in Melbourne was Pacific Werribee in 2018, when QIC bought from the billionaire Alter family.

Since then, regional shopping centre assets have changed hands in Perth, Adelaide and Cairns with buyers often smaller funds managers looking to reposition them. The GPT-managed fund sold in Darwin and Wollongong to non-institutional buyers who have reworked some parts of the properties.

The attraction for potential buyers of the interest in Northland is the chance to team up with co-owner and manager Vicinity Centres on the increasingly valuable parcel.

GPT, meanwhile, continues to grow its strong retail property management platform. After selling in Darwin and Wollongong, the GPT fund has kept to the lowest gearing in the sector, helping shield it from the rising cost of debt.

The company not only has the wholesale shopping centre fund, but also retail mandates from large superannuation funds, including UniSuper and the ACRT.

It is moving to sell amid the stabilisation of values of these larger assets, making them more liquid as there is increasing depth of buyers. Although buying so far has been dominated by a small group of funds management houses, including Haben, IP Generation and Fawkner, now larger companies including Vicinity Centres and Scentre have bought assets. Other offshore groups are also looking to acquire shopping centre assets and could be keen to team up with Vicinity Centres on the mall.

The two-level Northland mall dominates its catchment.

The GPT fund purchased the stake in the landmark Melbourne centre from the Canada Pension Plan Investment Board for $496m in 2014.

The two-level mall dominates its catchment. The 98,000sq m centre is anchored by Myer, Kmart, Target, Aldi, Coles, Woolworths and Hoyts Cinemas and more than 200 specialty stores. It also sports an outdoor entertainment and dining precinct.

Colliers and CBRE are managing the sale of the interest in the centre, which is expected to draw investors keen for exposure to the growth of Melbourne’s northern suburbs. The property has significant development potential, with a masterplan for a 30-year staged development. The site could hold 2300 apartments and office towers in future.

It has the best-performing Myer store in Victoria and boasts a major tenant weighted average lease expiry of nearly 7.5 years by income.

“Recent market conditions have seen a resurgence of liquidity, driven by $3.1bn in key scalable transactions over the past year. This favourable environment makes the introduction of Northland Shopping Centre particularly timely, presenting a unique opportunity for investors,” Colliers agent Lachlan MacGillivray said.

CBRE’s Mr Rooney added: “The value proposition for regional shopping centres has become increasingly compelling for investors, given the superior comparative returns on offer, rebased sustainable income profiles and robust performance fundamentals, as compared to most alternative commercial property asset classes.”

Existing shopping centres are winners from surging construction costs as they are limiting new supply at a time of ongoing population, jobs and wage growth. This is driving low vacancy rates, which provide strong tailwinds for retail property.

Retail is seen as likely to continue to outperform in the near term. The country’s large retail funds outperformed the broader Mercer/MSCI Wholesale index over the last 12 months, with the GPT fund topping the ranks.