This article is from the Australian Property Journal archive
EUREKA Real Assets, on behalf of the Commonwealth Superannuation Corporation has sold a 50% interest in the Indooroopilly shopping centre for more than $800 million on sub-4.5% yield, to two AMP Capital funds.
In addition to being the biggest single-asset retail transaction, Indooroopilly is the first super-regional shopping centre to be sold via an on-market campaign since 2010 and is the first super-regional shopping centre sale with management rights in over a decade.
The AMP Capital Shopping Centre Fund (ASCF) and AMP Capital Diversified Property Fund (ADPF) will each own a 25% in the super-regional centre and AMP will manage the centre as part of the deal.
Australia’s retail dealmaker king, JLL’s Simon Rooney handled the sale in conjunction with Colliers’ Lachlan MacGillivray.
Located 7km east from the Brisbane CBD, the centre was opened in 1970 and underwent a $450 million redevelopment in 2014 and currently comprises a gross lettable area of 116,447 sqm. It is underpinned by leases to seven major tenants including Myer, David Jones, K-Mart, Target, Coles and Woolworths, a 16 screen cinema, 14 mini majors including H&M and Uniqlo, more than 300 specialty shops, and parking for 4,600 cars.
The total site area is approximately 7.8 hectares, which offers long-term mixed use development opportunities including the potential to add 90,000 sqm in gross floor area.
ASCF fund manager Conrad Sinclair said the acquisition is in line with the fund’s strategy of owning superregional retail assets that dominate their trade area and with further potential for expansion.
“The deal follows a successful $200 million equity raising for ASCF, which was oversubscribed indicating the appeal these assets hold for investors,”
Sinclair said the fund’s investors now have an 81% exposure to regional and super-regional shopping centres.
ADPF fund manager Kylie O’Connor said the centre is consistent with the fund’s strategic objective to hold a diversified portfolio of high-quality assets across sectors, with a higher weighting towards regional and super-regional retail assets.
“We also believe now is the right time to invest in south-east Queensland due to improving economic conditions and strong population growth in the state,” she added.
The centre benefits from favourable demographics, with average household income in the centre’s catchment area 22% higher than the Brisbane average; good transport links; and strong trade area fundamentals including growing retail spend. Retail spend in the area is forecast to increase from $3.2 billion currently to $3.8 billion in 2021.
Rooney said the centre received significant domestic and offshore interest.
“Dominant super-regional shopping centres are rarely traded, tightly held and the opportunity to gain management rights was a major attraction to the leading industry operators looking to expand their platform.
“Investors globally are focusing on major shopping centres which dominate their trade area and offer customers an all-encompassing retail offering,” he added.
“Given the accelerated rate of change in global retail trends at present, investors are positioning their portfolios towards highly resilient assets which can outperform by delivering solid risk-adjusted returns.
“With Indooroopilly, investors were attracted to the potential to materially add value to the existing centre and capture long-term mixed-use development opportunities on the site – a trend we are seeing across the broader retail sector.
“The sale of a 50% share in Indooroopilly is further evidence of a strong and growing trend to joint venture transactions. We’ve had a number of major assets offered for sale in 2017 on a joint-venture basis. In addition to Indooroopilly, Rockingham Shopping Centre was also offered on a 50% basis, sold to AMP for over $300m and GIC & Vicinity Centres entered into a $1.1 billion swap transaction for 50% interest in three Sydney CBD assets with management rights for a 49% share in Chatswood Chase.” Rooney said.
MacGillivray said Indooroopilly was the first highly competitive on-market test for pricing benchmarks in the last few years.
“There was a lack of transaction evidence in the regional shopping centre sector over 2015 and 2016, but three regional shopping centres have traded in 2017. In addition to the sale of Indooroopilly, Highpoint Shopping Centre reflected a yield of 4.25% and Chatswood Chase reflected 4.75% – although both were direct off-market transactions.
“Selling for a sub-4.5% yield, Indooroopilly services the inner western and south western suburbs of Brisbane and represents one of only four super-regional centres in Brisbane.
“The shopping centre is a consistently strong performer and enjoys an affluent trade area, underpinned by attractive demographic characteristics. The average per capita income in the main trade area is 30% above the Brisbane metropolitan average and the population growth in the past 5 years has been 2.3% per annum, significantly higher than the Australian average of 1.7%.” MacGillivray said.
Australian Property Journal
