$1.2bn deal looms for Perth’s Garden City Shopping Centre

The wealth management giant runs one of the largest wholesale property operations in the country, and its move caps a run of shopping centre offers that has seen an estimated $11 billion worth of stock hit the market.

Traditional buyers have steered clear as department stores have sought to shrink their floor space and specialty retailers have struggled in the face of the e-commerce onslaught.

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But the largest players insist that top centres are holding their value and even yielding new opportunities, including mixed-use plays such as office or residential towers.

Investors in the AMP Capital fund that owns the centre, however, will kick off a process that could see a full or partial exit from the asset, which is based in the suburb of Booragoon and dominates a lucrative slice of the WA market.

The $6 billion vehicle is looking to manage its exposure to the retail complex, as it is one of its major holdings. The fund also owns an interest in the Quay Quarter Sydney now being built.

The Perth process could see AMP Capital take on a partner, as it did on a near-$3 billion Sydney development in which super fund REST took an interest last year.

A market is being established for major centres, with Singapore-based SPH REIT making a play for a half-stake in the $1.5 billion Westfield Marion shopping centre in Adelaide.

The interest is being offered by Lendlease’s flagship Australian shopping centre fund as it deals with hefty redemption requests and could offer the best guide to the worth of major retail properties.

Several WA shopping centres have already been offered for sale. In May, the Vicinity Retail Partnership, backed by the Future Fund and the Canada Pension Plan Investment Board, put Perth’s Midland Gate on the block for about $650 million, but a sale is yet to eventuate.

The partnership last year sold a half-stake in Rockingham shopping centre, south of Perth, for $305 billion to another AMP Capital fund. It also offloaded an interest in the $430 billion Grand Plaza complex in Brisbane to Invesco in a sign that international capital could replace some of the domestic capital that has cooled on the area.

Not all centres have traded. Last year, the Future Fund offered up a half-stake in Lakeside Joondalup Shopping City for about $650 billion but it did not trade.

But the prospect of AMP Capital offering lucrative management rights as part of the Garden City deal could draw in more active buyers.

Major operators, including Scentre, Vicinity Centres, QIC, GPT and ISPT as well as more passive players like superannuation funds, could form consortiums to bid on the property.

AMP Capital this month put a $750 million expansion of Garden City on hold but it has the right to reactivate this.

This could be a key selling point for mooted agents CBRE and Colliers International, which are expected to approach prospective buyers shortly.

There has been an arms race between rival developers to expand in Perth but these projects are unlikely to go ahead in their original formats, analysts say.

While the sale could see AMP Capital real estate unit cede control of the centre, it insisted its platform was receiving inflows despite widespread redemptions from retail funds and offers of units in unlisted trusts across the industry.

“Garden City is one of the best super-regional shopping centres in Australia, owned by investors in an AMP Capital-managed property fund,” an AMP spokeswoman says.

“Garden City has planning approval for a major expansion and AMP Capital is exploring a number of significant investment options in the centre.

“The asset represents a major investment and asset concentration for the fund that has a strong development pipeline.

“As with Quay Quarter Sydney, AMP Capital is considering all options available, including bringing on a capital partner.”

Although the shopping centre industry has faced challenges, major landlords have mainly held the value of their major centres in recent valuations.

However, there have been relatively few recent deals struck that test major retail values.

This article originally appeared on www.theaustralian.com.au/property.