Perth’s Midland Gate joins shopping centre selloff
Listed retail property group Vicinity Centres has added to the pile of shopping centres on the block, with an estimated $11 billion worth already up for grabs, by putting Perth’s Midland Gate shopping centre up for sale for about $650 million.
The move comes amid a rising tide of centres that are either officially on the market or are available for purchase from major groups including Lendlease, Stockland, GPT and Scentre.
The volume of centres hitting the market comes as a spending slowdown bites key retailers and industry concerns are emerging that the two-decade run of rising shopping centre values may now be reversing.
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In latest play, JLL’s Australasian head of retail investments, Simon Rooney, has been appointed by the Vicinity Retail Partnership and one of Vicinity Centres’ mandate clients to sell both the freehold interest and management rights in Midland Gate shopping centre.
The dominant and strong-performing regional shopping centre, which has recently undergone a major $100m overhaul, has a hold over Perth’s sprawling outer eastern suburbs, covering the Darling Escarpment and Swan Valley.
“While retail investors are selective, high-quality, core regional shopping centres with management rights are a highly unique offering and keenly sought, particularly those that sit in strategic population growth corridors within the tightly held Perth market,” Mr Rooney said.
The Vicinity Retail Partnership, backed by the Future Fund and the Canada Pension Plan Investment Board, has been selling assets with some success despite tough conditions.
It last year 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 to Invesco.
Regional shopping centres in Perth rarely trade and have a high rate of sales productivity relative to similar assets in other states.
Notwithstanding worries that are pervading the shopping centre industry, there have been just three comparable deals worth over $300 million in Perth in the past decade. The last individual regional centre to transact in WA was a one-third share in Karrinyup shopping centre in 2013, which UniSuper acquired from Westfield for $246.7 million.
Macquarie Equities analysts warned after their conference last week that cash flows generated by the retail REITs remained under increasing pressure.
Vicinity also indicated that assets earmarked for a $1bn wholesale fund would also need an overhaul unless it got the delayed vehicle away.
Stockland had also been slow to act on retail mall asset sales this cycle, the Macquarie analysts noted, which they said partially reflected weak direct market demand with about $11 billion currently for sale in Australia.
Stockland has sold off about $285 million out of its initial $400 million planned sales and could also seek partners on larger assets after marketing a stake in Shellharbour last year.
GPT is also open to finding a partner for up to one quarter of its massive Highpoint centre in Melbourne.
Macquarie says that retail sales growth for major real estate groups generally moderates in the March quarter and specialty stores are also hit by moderating growth.
Other big assets are also on the block. Lendlease’s flagship Australian shopping centre fund is dealing with hefty redemption requests by offering up a half stake in the $1.5 billion Westfield Marion shopping centre in Adelaide.
The Future Fund last year 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 northern suburbs.
Private equity giant Blackstone also put Sydney’s Top Ryde City shopping centre on the block for $700 million last year.
The Midland Gate shopping centre remains a prize as it spans a gross lettable area of more than 68,600sqm at the gateway to Perth’s burgeoning eastern growth corridor.
The centre’s redevelopment and expansion included the introduction of leading national brands Aldi, Harris Scarfe, JB Hi-Fi, Rebel Sport, a new fresh food precinct anchored by a Coles supermarket, an upgraded food court and a new Kmart store.
Macquarie says that property groups indicated they were hit by state and federal elections but once these were completed, along with potential interest rate cuts, there could be a more positive retail environment.
This article originally appeared on www.theaustralian.com.au/property.
