Scentre spend $720m on half-stake of Westfield Eastgardens

The move partly signals Scentre’s desire to take on more malls that have a mixed use element as it acknowledges the site’s longer- term potential given its prime inner Sydney position.

Scentre already has office towers above its Sydney CBD store, has flagged apartments at Hurstville in Sydney and its revamp of Westfield Doncaster in Melbourne may include a 14-storey tower.

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The Eastgardens transaction was struck at a crisp capitalisation rate of just 4.25%, continuing a run of mega-deals in the sector, which has seen the Alter family sell stakes in two Melbourne malls to QIC for $1 billion and AMP Capital grab a half-stake in Brisbane’s Indooroopilly Shopping Centre for about $800 million.

Westfield Eastgardens is one of the top 30 shopping centres in Australia with total retail sales of more than $600 million. The mall was fully owned by the Terrace Tower Group. Scentre has a good knowledge of the property as it is already in place as manager.

The redevelopment potential of Westfield Eastgardens lies in both a retail expansion and a mixed use development, as the pocket of inner Sydney in which it sits undergoes an overhaul.

“In line with the group’s strategy this transaction is a rare opportunity to invest in one of the highest quality ‘living centres’ in Australia,” Scentre Group chief executive Peter Allen says.

Westfield Eastgardens is regarded by planners as one of Sydney’s most strategic centres with a trade area that has strong forecast population growth, and more investment is being poured into the area’s infrastructure.

Owners are repositioning their portfolios towards defensive and high quality retail assets, which will continue to attract leading retailers and capture a growing share of consumer spend

Scentre flagged the introduction of local and international fashion retailers and expansion of dining, entertainment and lifestyle areas.

“In addition, Westfield Eastgardens offers a unique opportunity to create value through mixed use development, including commercial, accommodation and education facilities,” Allen says.

Selling agent, JLL’s head of retail investments, Australasia, Simon Rooney says: “Scentre’s acquisition is a strong positive endorsement for the retail outlook,” he says.

The $720 million sale is one of the top five largest single-asset retail transactions in Australia and shows demand remains strong for assets at the very top of the retail tree, despite concerns about the value of subregional centres.

Landlords of the largest centres are boosting their value by switching them into higher-spend leisure destinations that including space for apartments, co-working, and hotels, as well as putting in medical and child care centres.

Rooney says that such assets were “very highly sought after”. “The competitive pricing reflects the strong trading performance of the asset, growth in the trade area, improving socio-demographic profile and the improved connectivity of the new South East Sydney Light Rail,” he says.

Westfield Eastgardens offers a unique opportunity to create value through mixed use development, including commercial, accommodation and education facilities

Investors were drawn to the longer term mixed-use and residential opportunities the site presents, as well as the opportunity for a short-term lucrative retail redevelopment, which Scentre is well positioned to undertake.

Rooney says there is strong investor appetite for major, core retail assets in the Sydney metropolitan area.

“Investor sentiment is very positive towards core retail assets such as major regional shopping centres,” he said.

“Owners are repositioning their portfolios towards defensive and high quality retail assets, which will continue to attract leading retailers and capture a growing share of consumer spend.” .

Originally built in 1987, Westfield Eastgardens was expanded in 2002 and most recently in 2013 to about 84,220sq m of total lettable area.

The shopping centre is anchored by a Myer department store, three discount department stores, Kmart, Big W and Target, and three supermarkets, Woolworths, Coles and Aldi.

It also sports a Hoyts cinema, six mini majors; 230 specialty shops and kiosks, and at grade and covered parking for about 3263 cars.

The regional shopping centre was ranked 14th in Australia by annual turnover per square metre in the latest Big Guns Shopping Centre Survey.