This article is from the Australian Property Journal archive
FUND manager Fawkner Property has added to its run of major shopping mall purchases with the $390 million acquisition of Cairns Central in far north Queensland, in the second-biggest retail sector deal of 2023.
Fawkner is acquiring the 51,972 sqm centre from a Lendlease-run fund on a yield of about 7.5%.
Cairns Central is anchored by Myer, Kmart, Target, Coles, Woolworths and Event Cinemas, and as the only major shopping centre within 350 kilometres is one of Australia’s top performers reporting total sales of $511 million per annum. Major tenants report a combined $198 million in sales per annum and have a long weighted average lease expiry of 6.3 years by gross lettable area and 6.1 years by income.
Other key retailers include City Beach, Daiso, iPlay Australia, Rebel, Best & Less, Terry White Chemmart and JB Hi-Fi.
The centre occupies a landmark 9.4-hectare site, which is directly connected to Cairns Railway station.
Colliers’ Lachlan MacGillivray and McVay Real Estate’s Sam McVay acted on behalf of the seller. CBRE’s Simon Rooney advised and represented Fawkner Property in the deal.
MacGillivray said the Cairns Central deal was one of the few remaining opportunities to secure a 100% interest in a regional shopping centre in this investment cycle.
“We expect availability for this calibre of product to tighten further in 2024 and beyond,” he said.
McVay said campaign attracted international and domestic buyer demand.
The Cairns Central acquisition continues Melbourne-based Fawkner’s investment push into the regional and sub-regional retail categories, having acquired $1.7 billion in assets since 2021. In recent months it partnered with Hong Kong-based PAG to acquire Perth’s Midland Gate shopping centre for $465 million – this year’s biggest shopping centres transaction to date – while it also picked up Settlement City in Port Macquarie, also from an unlisted Lendlease-managed fund, for $107 million.
Its barnstorming run also included the acquisition of another Cairns asset, Stockland Cairns, for $146 million, on a capitalisation rate of 6.75%.
“Fawkner Property securing two such opportunities at Midland Gate Perth and Cairns Central demonstrates their strategic and counter-cyclical investment approach,” Rooney said.
“As the fundamentals continue to reset for high-quality retail assets and the sector moves into a clear growth phase, domestic private capital and increasingly offshore institutional investors, are strategically teaming up with specialist domestic managers like Fawkner Property and are proactively engaging and seeking out high-quality regional shopping centre opportunities prior to this window closing.”
Shopping centre sales picking up
CBRE expects a strong start to 2024, with a further $1 billion in retail transactions earmarked to go under contract or exchange in the first quarter of 2024.
Shopping centre sales have been starting to pick up amid the pre-Christmas rush, according to The Data App, albeit off a very low base. The research firm’s director, Rob Ellis, said there are “few signs yet that a meaningful upswing is unfolding”.
The Cairns Central deal comes hot on the heels of Charter Hall Retail REIT offloading $225.5 million worth of shopping centres in Adelaide’s Morphett Vale and Rosebud, on the edge of Melbourne, in line with book valuations following unsolicited off-market offers, and property fund manager Haben taking full control of the Stockland Townsville shopping centre, acquiring the remaining half-stake and management rights for $123.5 million. The price is a 9.5% discount to that centre’s June book valuation, and the deal follows Haben picking up an initial half stake in September for $115 million, at an 11.5% discount.
Both stakes were bought on yields of about 8%. The $238.5 million Haben paid in total is a far cry from the shopping centre’s valuation of more than $400 million in 2017.
Transaction volumes of commercial property in Australia sank to their lowest level for a September quarter in more than a decade, with a “fog” on pricing expectations between buyers and sellers, as well as economic and geopolitical uncertainty, hampering deal activity.
