Perron Group to offload Perth assets allowing GPT buying into two centres

The private Perron Group is negotiating to sell stakes in two of its largest Perth shopping centres to the listed GPT in one of its largest property exits since the death of its founder.

The Perron Group’s late founder, Stan Perron.

The private Perron Group is negotiating to sell stakes in two of its largest Perth shopping centres – Cockburn Gateway and Belmont Forum – to the listed GPT in one of the largest property exits by the company since founder Stan Perron died six years ago.

The two centres are being targeted by GPT, which is looking to expand both its retail empire and property funds activities, giving it the flexibility in how it houses the $500m worth of shopping centre assets.

The centres could be slotted into GPT’s overall retail platform which now comprises 17 shopping centres that generated annual retail sales of $11.5bn and are valued at just under $14bn.

At its annual results GPT said retail sales would benefit from strong consumer demand off the back of the July tax cuts, high levels of employment and wage growth.

The landlord is also benefiting from positive leasing metrics at a time when there is a limited supply of space while retailers are looking to expand. At its quarterly update last week, GPT said its retail portfolio continuing to enjoy strong momentum, with retail benefiting from positive re-leasing spreads.

The group’s funds arm is also shaking up its holdings. The GPT Wholesale Shopping Centre Fund in September put a half-stake in the $850m Northland Shopping Center in Melbourne on the block.

That move sparked a contest between local institutions, offshore investors and wealthy developers, keen on building their exposure to the sector as shopping centre values stabilise.

The latest move in Western Australia comes as the fund 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 GPT chief executive Russell Proutt.

The GPT fund has the firepower to make acquisitions, with ratings agency S&P last week saying that its financial credit metrics had strengthened after it used the proceeds from earlier asset sales to trim debts.

It paid down debt after selling Casuarina Square and Wollongong Central in fiscal 2022 and it has the capacity to expand, with S&P saying it would pursue opportunities to grow and use its debt capacity in the future to achieve an enlarged asset base.

The agency said the fund’s outsized exposure to the Highpoint Shopping Centre was a credit negative but the fund had disclosed it preferred to diversify via acquisitions instead of positioning the landmark Melbourne centre for an asset swap. S&P expects the fund to seek acquisitions that aim to improve its geographic diversity, which is weighted towards Victoria.

Both GPT and Perron declined to comment on the off-market transaction. Colliers agent Lachlan MacGillivray, who is believed is to be advising on the deal, also declined to comment.

Perron, a private WA-based group, has a highly profitable real estate unit and has pushed into areas like infrastructure investing as it diversifies its holdings to ensure that its portfolio spins off a lucrative income to back its philanthropic endeavours.

The billionaire founder, Stan Perron, died at the age of 96 in 2018.

His family manages one of the largest charitable foundations in the country.

Mr Perron was famed for building the Perron Group into an operation spanning real estate, infrastructure, car dealerships and iron ore royalties worth more than $4bn.

The group’s commercial property holdings include office blocks in the Perth CBD, but it sold in Sydney, offloading a stake in the 201 Elizabeth Street tower in the city’s CBD to Charter Hall and Abacus in 2019.

Perron Group also owns Westfield shopping centres in Geelong, Woden in Canberra’s south, the Broadway Shopping Centre in Sydney and The Glen and Westfield Airport West in Melbourne. Some are held in joint ventures which could draw buyers in coming years.

The two WA centres would be prizes for GPT and hold significant expansion potential.

Cockburn Gateway Shopping City is a two-level regional shopping centre in the southern Perth suburb of Success. It is anchored by Coles, Woolworths, Kmart, Big W and Aldi and has more than 170 specialty stores, and a dining precinct.

Perron Group has development approval for a renewal known as Cockburn Quarter – a $1bn scheme that would transform the centre into a major mixed-use development over the next two decades.

Perron Group bought the centre in 2000 shortly after it was built, and it was extended in 2006, 2007 and 2014. The 76,914sq m centre is on a 20.37ha parcel and has 3382 carpark spaces.

Belmont Forum is in Perth’s eastern suburb of Cloverdale. Perron bought the subregional shopping centre in 1983 and extended it in 1992, 1999 and 2000. It was most recently refurbished in 2016-2018.

The 47,772sq m complex has 2623 car bays and is anchored by Coles, Woolworths, Big W, Kmart and Aldi. The complex is on a 13.9ha parcel that is part of the Belmont Town Centre.

Perron Group remains one of the country’s most substantial private enterprises. It returned a net operating result before tax and unrealised gains and losses of $425m for fiscal 2024. This was 11 per cent higher than in fiscal 2023, reflecting the performance across the majority of the portfolio, which, for the most part, had generally favourable financial conditions for much of the year.

When the results were released, Perron chief executive Adam Irving said that, largely due to higher interest rates affecting the valuation of its retail property assets, the net book value of the group’s investment portfolio declined by $42m.

“This unrealised decline is reflected in our profit before income tax of $382m for the fiscal 2024 with a $147m decline in property valuations, partially offset by increased valuations across listed equities, infrastructure, private equity and other assets by $105m,” he said.

It was a record year of vehicle and parts sales for Toyota WA, with 29 thousand new vehicles delivered and work kicked off on the building of a $115m Toyota WA parts distribution centre. Work was also finished on the facade upgrade on Perth’s Central Park Office Tower, which the group co-owns with Frasers.

Perron Group is building out its non-property portfolio, which comprises infrastructure, listed equities and private equity investment, and makes up 42 per cent of the investment portfolio.

Mr Irving said the year had been focused on the strategy, which was consistent with the critical role Perron Group played as a permanent endowment to fund the activity of the Stan Perron Charitable Foundation, which is chaired by Elizabeth Perron.

“We are by no means there yet, and it will be some years before all the key components of this strategy are in place, but the ultimate objective is that our investment portfolio will allow us to generate the earnings that will allow us to meet the growing needs of the foundation,” Mr Irving said.

“The decision over the past year by the directors of the foundation to commit $135.5m over 10 years to enable the establishment of WA’s first-ever Kids Comprehensive Cancer Centre is a tangible example of Perron Group’s key strategic driver.

“As the potential size of the foundation’s giving increases, we have an obligation to be ready to step up with the required earnings to fund the commitments being made,” he said.

The investment portfolio would become more diversified so the group’s earnings would not become overly reliant on one key source of income, he added.

“At some point, every business sector and asset class go through cycles, and we want to ensure that we have a more even balance of underlying drivers to increase the probability of maintaining and growing the capacity to fund the activities of the foundation for generations to come,” he said.