Midland Gate added to surge in mall sell-offs

Perth’s Midland Gate shopping centre up for sale for about $600m

The Vicinity Retail Partnership, backed by the Future Fund and Canada Pension Plan ­Investment Board, will join with another major investor to put Perth’s Midland Gate shopping centre up for sale for about $500m.

The move to sell the centre, owned by the partnership managed by listed group Vicinity Centres and a mandate client, adds to the surge in shopping centres on the block.

While the outbreak of the pandemic all but froze the market for regional malls, they are again selling, with the Perth asset billed as being virtually unscathed by the crisis.

Trading also held up as Western Australia has contained the spread of Covid-19 and the sales campaign is poised to launch as the state’s borders reopen. Major landlords have reported trade in their shopping centres is bouncing back as the Omicron crisis recedes, although asset pricing has dipped on large malls.

The market has moved past a pre-pandemic logjam of larger centres being on the market with major groups including Lendlease, GPT, AMP and the Abu Dhabi Investment Authority and Canada Pension Plan Investment Board selling large properties.

In the latest play, CBRE’s Simon Rooney and Colliers’ Lachlan MacGillivray will handle the sale of both the freehold interest and management rights of the Perth shopping centre.

The dominant and strong-­performing regional shopping centre, which has had a $100m overhaul, has a hold over the city’s sprawling outer eastern suburbs. The prominent centre occupies a substantial 14.4ha town centre site at the gateway to a burgeoning growth corridor.

Comprising a gross lettable area of 68,600sq m, the centre is anchored by a triple supermarket offer of Coles, Woolworths and ALDI, in addition to discount department stores Kmart, Big W and Target and an eight-screen Ace Cinemas complex.

“The value proposition for regional shopping centres is now increasingly compelling for investors, given the attractive, superior comparative returns on offer, compared to most alternative commercial property asset classes, where pricing levels continue to be at historic highs,” CBRE’s Mr Rooney said.

He said local and offshore investors were re-engaging and seeking out top-end shopping centre investment opportunities, citing recent major transactions, including stakes in Sydney’s Macquarie Centre and Warringah Mall and Queensland’s Pacific Fair and Harbour Town Premium Outlets trading.

Colliers’ Mr MacGillivray cited the centre’s high productivity, strong performance, growth corridor location and surrounding transport infrastructure as drawcards.

“Western Australia’s retail sales growth has consistently outpaced the national average, with the state having recorded retail sales growth of 2.6 per cent on average over the past decade, outperforming the national average by 40 basis points,” he said.

Midland Gate is the only regional shopping centre in its trade area, and benefits from significant food expenditure of $2.5bn a year in the area.

The town centre location gives an incoming purchaser the potential to develop a long-term, future mixed-use development strategy.

Midland Gate is the last asset held in the Vicinity Retail Partnership. In 2018, it sold a half stake in Rockingham shopping centre, south of Perth, for $305m to AMP Capital, and a half stake in the $430m Grand Plaza shopping centre in Brisbane’s Browns Plains, sold to Invesco.

Regional shopping centres in Perth rarely trade and have a high rate of sales productivity relative to similar assets in other states.

The Future Fund in 2018 looked to ­reduce its exposure to Perth’s retail market through the offer of its stake in the $1.2bn Lakeside Joondalup Shopping City in the city’s northern suburbs.

Pricing levels continue to be at historic highs