This article is from the Australian Property Journal archive
SOME $2 billion in shopping mall deals is beginning to drop in the lead-in to Christmas, with Singapore-listed Paragon REIT and MA Financial offloading dominant Wollongong sub-regional Figtree Grove Shopping Centre to acquisitive Fawkner Property Group.
The $192 million sale comes in at a 5% premium the book value of $183 million, reflecting the recent bounce back in retail values – but it comes in comfortably below the $206 million paid in 2018 to Blackstone for the asset, showing the longer-term impact online shopping and the larger recalibration of values during the pandemic.
The pair were operating at the time as SPH REIT, which took an 85% stake, and as the asset management arm of Moelis.
Figtree Grove Shopping Centre ranks in the top 10 sub-regional assets in Australia, as per the Shopping Centre News Little Gun 2023 Rankings by performance. It comprises around 22,000 sqm of gross lettable area and generates annual sales of over $220 million.
The centre is anchored by Coles, Woolworths and Kmart, complemented by 65 specialty stores.
“As part of its proactive asset management and enhancement strategies, Paragon REIT regularly evaluates opportunities to optimise its quality portfolio and to unlock strategic value for redeployment of capital to initiatives to enhance returns to unitholders of Paragon REIT,” Paragon REIT said in a statement to the Singapore Stock Exchange.
“The divestment consideration enables Paragon REIT to divest at a premium while maintaining a strong foothold in its key markets.”
Nick Willis and Sam Hatcher from JLL managed the expressions of interest campaign.
On the buy side, Melbourne-based fund manager Fawkner Property has had a busy 12 months adding over $1.1 billion of shopping centres to its portfolio. Fawkner’s string of deals has included Stockland Nowra, which is in proximity to Figtree Grove, flagship regional shopping centre Cairns Central, acquired last year from Lendlease in a blockbuster $390 million, and more recently the $212 million purchase of Willows Shopping Centre in Townsville.
After more than half a decade of repricing and challenging fundamentals, the retail property sector is looking compelling on a relative value basis, according to Dexus, with yield expansion milder than other core commercial property markets, and “investors are waking up to the positive story”. Despite consumer wariness of the higher cost of living, Scentre Group has reported visitation to its Westfield shopping centres has increased so far in 2024 compared to last year.
$2 billion in deals beginning to drop
Deal-making momentum has been gathering in the retail sector throughout the 2024. Cushman & Wakefield’s latest Capital Markets Marketbeat report showed the retail sector has posted strongest performance since 2021, attracting $3.8 billion in investments year-to-date. This was headlined by Hines and Haben’s joint acquisition Westpoint Shopping Centre in Blacktown for $900 million – the largest standalone retail transaction in Australian history.
Dexus is reportedly eyeing off Woodgrove Shopping Centre, in Melbourne’s west, from Queensland Investment Corporation in a deal likely to tally around $450 million, and it is also looking at a half-stake Erina Fair on the Central Coast in what could be a $380 million deal with South Korea’s National Pension Service.
It comes the NSW Supreme Court ordered that Dexus wholesale fund sell its half stake in Macquarie Centre to superannuation giants Cbus and Unisuper for $830 million, agreeing with the pair that rights to take over the entire asset.
Meanwhile, GPT is considering buying Perth pair Cockburn Gateway and Belmont Forum from Perron Group for around half a billion dollars; and its flagship retail property fund is on the brink of a deal to sell a half share in Melbourne’s $850 million Northland Shopping Centre.
During the year, major ASX-listed malls owner Vicinity Centres nabbed a half stake in Lakeside Joondalup for $420 million from the Future Fund – at a hefty discount the asking price all the way back in 2018 – while its major rival Scentre Group has paired with Barrenjoey to double-dip in Adelaide, buying Dexus’ 50% stake in Westfield Tea Tree Plaza in Adelaide for $308 million, and then a half interest in Westfield West Lakes for $167.30 million.
