This article is from the Australian Property Journal archive
THE Lendlease-managed Australian Prime Property Fund Retail has confirmed it is shopping around a 50% stake in Westfield Carindale.
With a gross lettable area of 139,605 sqm the Brisbane centre is the 12th largest shopping complex in Australia, and was ranked 9th for total moving annual turnover performance in the 2019 Shopping Centre News “Big Guns” publication with $880 million.
Located in Brisbane’s south eastern suburbs, about eight kilometres from the Brisbane CBD, the centre services a trade area population of nearly 680,000 that generates $9.7 billion in total retail expenditure.
CBRE’s Simon Rooney and Lachlan MacGillivray of Colliers have been appointed to the stake. The remaining 50% interest is owned by ASX-listed Carindale Property Trust. Scentre Group, owner and operator of Westfield centres in Australia and New Zealand, will retain management.
Westfield Carindale is anchored by a refurbished and consolidated David Jones, Myer, Coles, Woolworths, a new Kmart, Big W, Target and an Event Cinemas, together with 23 mini-majors, 291 specialty tenants, 51 kiosks and six offices.
There is long term potential for further development, given the centre’s substantial and underutilised land holding of 16.45 hectares, including the adjoining and jointly owned Carindale Home and Leisure Centre and Millennium Centre.
APPF Retail is looking to satisfy up to $2 billion in redemption requests and recently sold a 50% stake in Westfield Marion to SPH REIT for $670 million in the biggest deal of 2019. However, at more than a 9% discount to book value, the transaction may prove to be a new yardstick for the sector. The cap rate was about 5.6%.
Major deals concluded earlier in the year included the sale of 50% of Westfield Burwood by Scentre Group to Perron Group for $575 million, on a sub-5% yield, and a half share in Garden City Booragoon to Scentre Group from AMP Capital Diversified Property Fund for $570 million at a cap rate of 4.75%.
According to new figures from The Data App, cap rates in the retail sector have been entrenched over the past six months in the 6% to 6.5% range.
More isolated data shows cap rates for commercial retail property assets jumped to 7.14% in January, up from 5.28% in December, largely due to the circa $150 million sale of the Brimbank Plaza sub-regional centre, which has a fully leased annual net income of about $12.3 million.
Rob Ellis, director of The Data App, said that by the same token, a greater degree of stability is also being exhibited in the price paid per sqm where, in trend terms, there has been no discernible movement, one way or the other, for over a year.
“In spite of what appears to be a quiet market, the number of assets sold in January is little different from January last year although, in trend terms, both the number of transactions and the volume of GLA are both lower than a year ago.”
He said weak real income growth and restrained personal borrowing continues to keep retail spending subdued, all of which will be dampened both now and in the coming months by the fall-off in Chinese tourism due to the coronavirus.
“As well as these negative cyclical forces impacting on retail spending, the increasing preference for internet shopping continues unabated. However, counteracting weak economic fundamentals is the low cost of debt and favourable valuations, particularly when compared to other commercial assets.
“Indeed, with real interest rates less than 0.5%, the risk premium is averaging around 6%, thereby making commercial retail assets attractive; particularly those which are not heavily reliant on discretionary spending and don’t require meaningful capital investment,” Ellis said.
“Given the confluence of conflicting forces, it is difficult to see cap rates deviating significantly from current levels.”
