Centres trade, investors chase retail returns
Funds manager Exceed Capital is buying Allenstown Square in Rockhampton.
Neighbourhood shopping centres are still trading at a brisk pace with big players, including supermarket giant Woolworths and Charter Hall, cashing in on the strong market for defensive assets that will come through the cycle.
The moves are part of a late year lift in activity with Sentinel recently selling Canberra’s Tuggeranong Homeworld to Garry Allan Carter’s Metro Diversified Property Management for $46m.
US giant LaSalle Investment Management has also tied up a deal to buy Crossroads Homemaker Centre in Casula in southwest Sydney for $282m from property investment house AsheMorgan.
That deal, via JLL and Stonebridge, will be the largest retail transaction of the year after a series of even bigger regional shopping centres went on the block, but could not attract buyers at prices where vendors would sell. But smaller shopping centre sales that have flown under the radar have kept up even as interest rates have risen, which has hit values in some areas.
Buyers have been drawn to the certainty of income from neighbourhood centres, while assets with more exposure to discretionary spending are suffering. Neighbourhood centres are faring particularly well in areas where the surrounding economy relies on strong sectors.
Funds manager Exceed Capital is buying Allenstown Square Rockhampton, a dominant neighbourhood shopping centre, from the listed Charter Hall Retail Trust.
The listed manager has declined to comment but centre was held on a book value of about $58.8m and a capitalisation rate of 6.25 per cent and is understood to have sold for about $58.5m via JLL’s Jacob Swan.
The listed group declined to comment but had recorded a tightening of capitalisation rates on neighbourhood shopping centres as the industry has performed well through the coronavirus crisis.
Charter Hall has been reworking its retail portfolio for the past five years, trimming the number of its shopping centres from 70 to 50, and putting the capital into higher growth metropolitan shopping centres and long-leased convenience retail with inflation-linked rent growth.
Exceed’s unlisted trust will buy the full line Woolworths along with about 11,000sq m of adjoining development land. A new vehicle, the AT Property Trust, will offer a 7 per cent first-year cash yield and expectations of added income through expansion in future.
Separately, supermarket giant Woolworths is selling two of its newest neighbourhood shopping centre developments in southeast Queensland, amid continued strong demand for convenience-based retail investment opportunities.
CBRE’s Michael Hedger, Joe Tynan and James Douglas and JLL’s Mr Swan, Sam Hatcher and Ned McKendry, are selling the Dakabin and Bannockburn centres in Brisbane, which are anchored by long-term leases to Woolworths.
CBRE’s Mr Hedger tipped interest from domestic and offshore interest from institutional investors, unlisted property funds and private buyers.
JLL’s Mr Swan said that with discretionary spending likely to be affected in the short-term as consumers’ budgets were squeezed from inflationary pressures, “demand for defensive, non-discretionary assets will continue to draw the most aggressive capital throughout 2022”.
