Investor support for mid sized Shopping Centres appears to have held firm following the sale by Lendlease’s Australian Prime Property Fund Retail of the CS Square shopping centre to privately owned DeGroup for $136.5 million.
CS Square is a Sub Regional Centre with 25,308sqm of NLA, anchored by Woolworths, Coles, Aldi, and Target (soon to be replaced by KMart) and supported by 300 specialty stores. It is situated in the Caroline Springs Town Centre which was developed by Lendlease approximately 20km north-west of the Melbourne CBD. The centre underwent its most recent expansion in 2019.
The sale included CS Commercial (1,603 sqm), a complementary mixed-use precinct opposite CS Square, which is fully leased to 5 retail & office tenants over 2 levels and 1.28-hectares of strategically held vacant land in two separate lots.
APPF Retail has faced mounting pressure from investor redemptions and placed the Centre on the market in early 2021 after deferring the decision to exit until after the COVID pandemic had eased. The Fund sought approval to sell down its assets in an orderly manner and gave itself 3 years to meet the redemption requests of investors wanting to exit the fund. The Fund’s liquation process began in 2019 with the sale of 50% of Westfield Marion which it sold for $670M. The Fund also owns full or partial interests in Westfield Carindale, MacArthur Square, Lakeside Joondalup, Craigieburn Central, Cairns Central, Caneland Central, Sunshine Plaza, Harbour Town Gold Coast and Erina Fair.
The sale of CS Square attracted a high level of interest from prospective buyers, which was sought after due to its town centre location in the growing catchment of Caroline Springs and for its value-add opportunities. Industry sources reported that the sale of the asset at $136.5m represents a passing yield of 6%.
Lachlan MacGillivray of Colliers International and Carl Molony of Stonebridge Property Group managed the sale.
Anne MacSporran, Fund Manager of APPF Retail said, “The strategic divestment of CS Square represents a strong result for investors, especially in light of recent market conditions.
“The outlook for Australian retail remains positive with sales stabilising post pandemic. With the sector undergoing an evolution in response to changing consumer trends, APPF Retail is progressing its urban growth centre strategy, positioning our core assets to capitalise on mixed use opportunities which will cater to future lifestyle, technology and shopping needs.”
Lachlan MacGillivray, Head of Retail Investment Services at Colliers, said “As anticipated, the campaign attracted incredible market demand owing to the quality of the asset, its strong underlying fundamentals and value-add potential. We received unprecedented bidding from high net worth private investors, institutions, syndicators and international investors looking to partner with domestic managers.”
Colin DeLutis, Chairman of DeGroup said “We have been following the performance of CS Square for a long period of time and feel that it is a perfect fit for our high-quality portfolio of convenience and service focused centres. We also see a major opportunity to take advantage of the current market dislocation in pricing between sub-regional yields and bond rates, which we expect to continue for some time to come.
“CS Square is a significant asset with exceptional growth potential in one of Melbourne’s key growth areas. The defensive nature of the asset is further strengthened due to its significant proportion of income derived from national businesses and importantly a centre WALE in excess of seven years.”
Our Views
Whilst the reported yield of 6% seems about right for the asset the sale includes other assets which should be backed out of the sale price to consider a true yield on the Shopping Centre.
The CS Commercial asset is fully leased and complimentary to the Centre, however the two development sites which comprise 1.28ha are likely to be worth in excess of $10m. If this value is netted off the purchase price, it would result in an acquisition of the Centre and CS Commercial asset of $126.5M which based on the passing income estimate would then equate to a passing yield of 6.5%.
Our RESourceData information on transactions indicates that average retail assets cap rates have fluctuated over the past 18 months depending on the type of assets being sold.
Neighbourhood Malls have firmed from 6.4% to 5.7%, Sub Regional Malls have remained flat at 6.5%, Regional Malls have softened from 5.4% to 6.25% and no activity to assess changes for the Major Regional and Super Regional Mall grade assets.
We continue to favour well located Neighbourhood Centres which have a high proportion of non discretionary retail business catering to the daily needs of an immediate (& preferably growing) catchment.
Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Related Articles
