This article is from the Australian Property Journal archive
THE Besen family have sold their remaining 25% interest in Highpoint shopping centre to GPT for $680 million, a 10% premium to the June 30 2017 book value.
The GPT Wholesale Shopping Centre Fund (GWSCF) has exercised its pre-emptive right to buyout the stake in the Highpoint shopping centre and Maribyrnong Homemaker Centre from the Besen family’s Highpoint Property Group.
The sale price reflects a yield of 4%.
The purchase will increase GWSCF’s stake to 83.33% with GPT holding the remaining 16.67% interest.
GWSCF fund manager Brett Williams said he was pleased the fund had secured the additional stake, giving it further ownership of a very successful, high performing asset.
“Securing this additional interest in Highpoint is a great outcome for the fund and another important step in delivering on the fund strategy following the successful sale of Westfield Woden in December 2016.
“Highpoint has delivered an exceptional return of 15.1% over the past 12 months. Super prime regional centres of this calibre are rarely traded in Australia. Not only does Highpoint rank in the top five centres in Australia with regards to total centre sales, it is located within an exceptional catchment with over 1.3 million people,” he added.
Highpoint is one of the leading super regional shopping centres in the country and is in the Top 5 of the Big Guns of shopping centres, with an annual moving turnover of almost $1 billion.
Williams said Highpoint also presents several immediate asset enhancement opportunities including the expansion of the cinema and entertainment precinct, introduction of additional international retailers, and the development of a second supermarket and fresh food precinct.
There is also mixed use development opportunities in the future. Last year the Maribyrnong City Council rezoned seven precincts comprising and adjoining Highpoint, unlocking the potential for around 2,500 apartments and retail space worth in excess of $1 billion.
The deal was no warmly welcomed by analysts, who believe GWSCF is putting all its eggs in one basket.
S&P Global Ratings has revised its outlook GWSCF to negative from stable.
“In our view, the Highpoint acquisition increases the fund’s exposure to a single asset that could weaken its ability to weather potential future headwinds in the center’s trade catchment area,” S&P analyst Craig Parker said.
“Post this acquisition, Highpoint represents about 44% of total asset value (up from 36%). The acquisition will be debt funded, increasing gearing (debt-to-assets) to 26.1%.
“The overweighting to a single asset has weakened GWSCF’s business profile. However, the increased ownership in one of the best shopping center assets in the country, with a growing catchment trading area, has partly offset weakening credit quality. The ability to maintain modest credit metrics over our forecast period has assisted in preventing an immediate lowering of the rating.
“The negative outlook reflects our expectation that the manager of GWSCF will seek to reduce its single asset exposure over time, and that the implementation of the proposed capital management initiatives partially offsets the deterioration in the fund’s credit metrics. However, the fund’s exposure to a single asset remains the key risk, in our opinion, and we expect the manager’s initiatives to moderate this exposure and reduce debt to be indicators of support for the ‘A-‘ rating,” he added.
“We would consider a downgrade if the fund manager is unable to evidence progress toward diversifying the fund’s asset portfolio over the next couple of years into assets that are consistent with its operating strategy. In addition, should the fund’s credit metrics deteriorate below FFO to debt of 15% for a period of time, we would question management’s commitment to maintaining a more conservative financial risk profile during this period of heightened asset concentration.
“We would revise the outlook to stable if the fund delivered on its asset diversification strategy such that it reduced the Highpoint exposure and newly acquired assets were consistent with its operating strategy,” Parker said.
Completed in 1975, Highpoint currently comprises a GLA of 154,000 sqm and 7,341 car parking spaces. The centre boasts 474 tenancies with an occupancy rate of 99.9%. It is anchored by a Myer (19,120 sqm) and David Jones (14,000 sqm) department stores, along with Target (9,920 sqm); Hoyts (9,030 sqm); Big W (8,160 sqm and Woolworths supermarket (4,240 sqm). The centre also boasts international brands such as Zara, Topshop, Apple and Samsung.
The sale ends the Besen family’s partnership with GPT at Highpoint after more than 10 years. GWSCF bought a 50% interest in the centre in March 2006 for $621.2 million. In 2009, the family offered the fund first rights to buy a further 16.67% interest but GWSCF declined the offer and handballed it to GPT, which paid $206.3 million (excluding acquisition costs) on a cap rate of 6%. HPG sold a further stake in 2014.
Australian Property Journal
