Scentre Group nabs $720m half stake in Westfield Eastgardens

Scentre Group has bought a half stake from Terrace Tower Group for $720 million in a deal that defies slump predictions.

The sale is in the top five largest single-asset retail transactions to occur in Australia.

The heavyweight Scentre Group has swooped on a half stake in Westfield Eastgardens buying it from the private Terrace Tower Group for $720 million in a deal that defies predictions of a slump in shopping centre values.

The transaction was struck at a crisp capitalisation rate of just 4.25 per cent, continuing a run of mega-deals in the sector, which has seen the Alter family sell stakes in two Melbourne malls for $1 billion and AMP Capital grab a half interest in Brisbane’s Indooroopilly Shopping Centre for about $800m.

Westfield Eastgardens is one of the top 30 shopping centres in Australia with total retail sales of more than $600m It was fully owned by the Terrace Tower Group and Scentre had a good knowledge of the mall that it also managed.

Westfield Eastgardens holds significant redevelopment potential for both retail expansion and mixed use development as the pocket of inner Sydney in which it sits undergoes substantial renewal.

“In line with the group’s strategy this transaction is a rare opportunity to invest in one of the highest quality living centres in Australia,” Scentre Group chief executive Peter Allen said.

Westfield Eastgardens is regarded by planners as one of Sydney’s most strategic centres with the trade area that has strong forecast population growth and investment is being poured into infrastructure, including increased public transport.

The centre presents redevelopment opportunities, which could see Scentre introduce local and international fashion retailers and expand the dining entertainment and lifestyle areas.

“In addition, Westfield Eastgardens offers a unique opportunity to create value through mixed use development, including commercial, accommodation and education facilities,” Mr Allen said

Selling agent, JLL’s Head of Retail Investments, Australasia, Simon Rooney said it was another landmark transaction. “Scentre’s acquisition is a strong positive endorsement for the retail outlook,” he said.

The $720 million sale is in the top five largest single-asset retail transactions to occur in Australia and shows that demand remains strong for fortress style assets at the very top of the retail tree.

Many landlords are also driving value from such assets by switching them into higher-spend leisure destinations and including mixed use space including apartments, offices, and residential, as well as putting in medical and child care centres.

Mr Rooney said that such assets were “very highly sought after”. “The competitive pricing reflects the strong trading performance of the asset, growth in the trade area, improving socio-demographic profile and the improved connectivity of the new South East Sydney Light Rail,” he said.

Investors were drawn to the longer term mixed-use and residential opportunities the site presents, as well as the opportunity for a short-term lucrative retail redevelopment, which Scentre is well positioned to undertake.

Mr Rooney said that there was strong investor appetite for major, core retail assets in the Sydney metropolitan area. Few have traded this year but he argued that they were rarely available to purchase and were benefiting from supportive demographics and the solid NSW economy.

“Investor sentiment is very positive towards core retail assets such as major regional shopping centres. Owners are repositioning their portfolios towards defensive and high quality retail assets, which will continue to attract leading retailers and capture a growing share of consumer spend,” Mr Rooney said.

Originally built in 1987, Westfield Eastgardens was expanded in 2002 and most recently in 2013 to about 84,220 sqm of total lettable area. The shopping centre is anchored by a Myer department store, three discount department stores, Kmart, Big W and Targe, and three supermarkets, Woolworths, Coles and Aldi.

It also sports a Hoyts cinema, six mini majors; 230 specialty shops and kiosks, and at grade and covered parking for about 3,263 cars.

The regional shopping centre which was ranked 14th in Australia by moving annual turnover per sqm in the 2018 the latest Big Guns Shopping Centre Survey.

An overhauled Westfield Eastgardens could leverage off the expansion of new international retailers into Australia, to further enhance trading performance and customer footfall.

Located just 10 kilometres southeast of the Sydney CBD, the trade area has experienced rising urban density as a result of the city’s apartment boom.