Scentre, Barrenjoey team for next Adelaide mall play amid market reset
The shopping centre landlord is turning funds manager as it looks to capitalise on the sector’s big shift, but the deal confirms the value of big centres has dropped.
The big reset in the shopping centre market is gathering steam, with the owner of the local Westfield empire again teaming up with investment bank Barrenjoey to buy a half interest in a $350m Adelaide mall.
Scentre Group and Barrenjoey Private Capital are buying a half interest in Westfield West Lakes from a Dexus-run fund for a total price of about $174m, with the move coming hot on the heels of the pair buying a stake in another Adelaide property, Tea Tree Plaza, in April.
The deal, being brokered by CBRE’s Simon Rooney, is another sign that even the best shopping centres have dropped in value in the wake of the coronavirus crisis and since interest rates have been hiked, even though retail property is a much more certain bet than office towers.
The price implies a market yield of about 8 per cent and the deal is below the valuation of $185m at the end of June, and well off the peak valuation of $260m in 2014 before e-commerce swept the market.
More large transactions are now in train for some of the country’s largest centres that show the drop in values is applying to the best assets, with close to $3bn worth of assets in play.
The action had been dominated by a group of private players including Fawkner, IPG and Haben, but bigger institutions are now getting into the sector. Large-scale offshore institutional capital is also re-entering the market as the opportunity to snare centres at bargains is fading.
Although the parties and agents declined to comment, the latest play will effectively reset the values of shopping centres nationally, as landlords have been holding their centres at much tighter rates.
Other big end transactions are also showing the shift.
The sprawling Westpoint Blacktown in Sydney’s western suburbs is being sold off by QIC to a venture between local house Haben and US player Hines for about $900m and the Australian firm is out raising capital
In Perth, Australia’s Future Fund has struck a deal to sell off a half-interest in a major Perth mall for about $420m to listed company Vicinity Centres, in a sign that other listed players are seeing the value on offer.
The 50 per cent stake in Westfield West Lakes centre is being sold by the unlisted Dexus Wholesale Property Fund, with Scentre already owning the other half. The group and investment bank have just launched a capital raising to fund the $174.75m purchase of the half stake in the centre.
Scentre and Barrenjoey are looking to raise about $83m for The West Lakes Opportunity Trust to fund the acquisition of the 50 per cent interest in the property under a pre-emptive right with the vendor. Westfield West Lakes in the west of Adelaide is on a significant land parcel of 20.4ha with potential for residential development.
Other deals on Westfield centres are also in train.
In Perth, Asian-backed JY Group is buying another Westfield-run property, Whitford City, from Singapore fund GIC for a price of about $185m. All up, there is almost $1.7bn under contract and more deals are headed in this direction.
There are about $1bn of large centres that are now up for grabs, including a half interest in Claremont Quarter in Perth that funds house QIC is offering for about $200m. Investment group MA Financial is also selling Armada Arndale in South Australia, with hopes of about $130m, and in Sydney funds heavyweight ISPT is selling its interest in Warriewood Square for about $135m.
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