Welcome to this week’s Property News.
The retail market came back into the spotlight this week with the sale of a portfolio of neighbourhood and sub regional malls by the Lederer Group to IP Generation, reflecting a circa 6% yield. Meanwhile SCA Property Group announced the acquisition of Raymond Terrace Marketplace at a 5.86% yield and provided their portfolio re-valuation results which reflected the strength in the Neighbourhood Malls with cap rate compression of 50bps and with Sub Regional Malls tightening 43bps.
The next test for the sector will come with the sale by QIC of a 50% stake in the highly successful Westfield Helensvale regional shopping centre in South East Queensland. The Centre has a GLA of 44,800sqm and includes a double discount department store centre (K Mart & Target), 3 Supermarkets (Woolworths, Coles, ALDI) and 136 specialty stores. QIC have put up for sale their interest in the plaza as part of a need to meet redemption requests from investors.
AMP Capital’s private clients will be watching the sale closely with a 50% sale of Pacific Fair and Macquarie Centre likely to be next on the cards as CPBIB and ADIA look to exit their investments. Dexus, who owns a further 20% of Pacific Fair following their takeover of the management of ADPF, is also expected to off load their interest in Pacific Fair. The sale of these major centres will provide a signal to the rest of the market with other major investors (ie Blackstone, QIC and Vicinity) still seeking to off load major assets in the Shopping Centre sector.
We expect that notwithstanding that Major Retail Centres are likely to face a period of lower rents and higher capital expenditure, these assets will still trade below 6%. A this price, they remain over 150bps softer than premium industrial assets and probably 250bps softer than where the typical centre would have been trading if not for COVID and the threat of online sales. This risk premium seems about right and translates to a loss of around 30%-40% in value. At the right price and with the right strategy to drive customers back to Major Regional Centres (the cost for which is factored into the acquisition) then there will be acquisitions that make investment sense at these cap rates.
I’d be keen to hear your thoughts.
If you have any news, information or research reports you’d like us to share with the market, please feel free to send me an email at info@propertymarkets.news.
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