$2bn of Retail Centres hit the market

19 May 2019

Over $2bn of shopping centre assets have hit the market this week with another $9bn expected to come over the coming months. Stockland, Vicinity, Lend Lease, Dexus and GPT are all sellers of shopping centres as the groups seek to raise capital to meet redemption requests from investors or seek to re-balance their portfolios away from the troubled retail sector. With few buyers in the market many assets are now trading at a discount to book values or are being withdrawn from the market. New to the Market Lend Lease – $737m The largest Centre to by placed on the market is Lend Leases’ 50% interest in the giant Westfield Marion, Australia’s 11th biggest Centre. The Centre has two full-line department stores in David Jones and Myer, as well as Harris Scarfe, Big W, Kmart and Target discount department stores, Coles, Woolworths and ALDI supermarkets, Dan Murphy’s, Bunnings and an Event Cinema complex, approximately 310 specialty stores. The 50% interest is expected to be sold for $737m which is the current value held by Scentre, who owns the other 50% of the asset. A sale at this price will reflect a yield of circa 5.15%. Scentre hold a pre-emptive right and are the natural buyer as they will seek to preserve the capital value of the Centre however it may not be easy for SCentre to swallow a large asset. Redemptions in Lend Leases’ Australian Prime Property Fund Retail of circa $2bn have forced the group to sell major assets as investors pile out. The decision of which of he 11 APPF assets to sell, is difficult for Lend Lease. Do they sell fewer larger co-owned assets to maximise the chance of getting book value or sell more non-core assets at a discount? I would expect Lend Lease will wait for the outcome of Marion before selling off some of its regional assets such as Carins Central, Caneland Central or a 50% interest in some of their larger wholly owned centres. Vicinity & Commonwealth Bank Group Super – $650m Vicinity announced this week the sale of Midland Gate Shopping Centre, the dominant regional centre in Perth’s eastern suburbs, with a total gross lettable area (GLA) of over 68,600m2. The Centre is a co-ownership between the Vicinity Retail Partnership (backed by the Future Fund and the Canada Pension Plan ­Investment Board) and the Commonwealth Bank Group Super fund. The group recently invested $100M to expand the Centre from 55,297m2 to include 30 new specialty retailers. Vicinity are hoping to reap $650M for the Centre. Vicinity & Challenger – $185m Vicinity have also hit the market with the sale of Challenger co-owned assets at Corio Central in Geelong and Lennox Village in Sydney. Corio Central is a high-yielding subregional shopping centre in Geelong which is worth about $115 million and held a yield of 7.5 per cent. Lennox Village is a $70m Sydney metropolitan neighbourhood shopping centre in Emu Plains in the city’s western suburbs. GPT – $149m GPT are looking to sell its interest in Norton Plaza, Leichhardt, a convenience-based mall, comprising an 11,800-squaremetre centre with a Coles supermarket and 50 retailers. Norton Plaza has a book value of $149.3 million and is held on a capitalisation rate of 5.5 per cent. Dexus claim the sale is part of the wholesale fund’s broader effort of focusing its portfolio on superregional malls as a bulwark against headwinds in the retail sector. Dexus – $100m Dexus Wholesale Property Fund (DWPF) are looking to offload a 100 per cent freehold interest in Beenleigh Marketplace, a sub-regional shopping centre located 32-kilometres from Brisbane’s CBD with expectations of offers over $100m. DWPF acquired the 19,476 square metre asset in 2013 for $88.3M. The Centre is anchored by Woolworths and Big W and spans a 60,680sq m site. DWPF is an open-ended unlisted property fund with a diversified $9.0 billion portfolio of office, retail and industrial properties located throughout Australia. Also new to market this week are Willodwdale, Amaroo and Central Park Mall #LendLease #Vicinity #Challenger #Dexus #GPT #Retail