This article is from the Australian Property Journal archive
HONG Kong’s private investment firm PAG continues to enjoy some discount shopping down under after snapping up Midland Gate for discounted price of $465 million, in Perth’s first major regional shopping centre sale this year.
PAG has acquired the Midland Gate shopping centre from the Vicinity Retail Partnership and from the Commonwealth Bank Group Super.
Investors in the Vicinity Retail Partnership include the Future Fund and the Canada Pension Plan Investment Board.
The sale price is below the initial expectations of $600 million and the revised expectations of $500 million.
It is believed the parties eventually reached an agreement after the property had been on the market since February last year. The extended negotiations reflect the current stand off between sellers and buyers which has seen commercial real estate transactions plummet.
Midland Gate is a single level regional shopping centre located approximately 18 kilometres north-east of Perth’s CBD. Comprising 68,850 sqm, the centre is anchored by Big W, Kmart, Target, ALDI, Coles, Woolworths and ACE Cinemas and includes more than 155 specialty stores. The centre has a new fresh food precinct and an expanded dining offer. In 2018, the owners completed a $100 million major refurbishment.
The centre boasts 8.4 million annual visits in a trade area of 243,323 people.
For the Vicinity partners and Commonwealth Bank Group Super, the sale is culmination of a 4-year long effort and is the second attempt to sell the property.
The property was initially put on the market in May 2019. At the time, the price expectation was $650 million.
The eventual sale to PAG is $185 million below the 2019 price expectation, reflecting how far retail values have fallen, as evidenced by this week’s transaction with AMP Capital Shopping Centre Fund selling its half interest in a Townsville shopping centre for $115 million – 50% below what it paid nine year ago, to Sydney-based fund manager Haben Property Group.
The Townsville sale price is a discount to the June 2023 book value of $130 million and a 7% cap rate that Stockland had pencilled in its books for its half share and is below the $150 million June 2022 valuation.
The sale of Midland Gate is Vicinity’s second major divestment in three months after it offloaded a 50% increase in the Broadmeadows Central regional shopping centre to Nikos Property Group for $134.5 million.
This transaction has injected activity back into the market which has witnessed a lack of deals despite a glut, including more than 400,000 sqm of retail space placed in August alone, as the gap between the expectations of buyers and sellers widens.
Meanwhile PAG is taking advantage of asset repricing in the commercial property market to purchase investments for a discount.
In June it snagged the A grade office building in 44 Market Street Sydney from Dexus for $393.1 million – reflecting a 17.2% discount to book value.
And just last month PAG paid $1.4 billion for Australian Venue Co (AVC), the owner and operator of more than 210 pubs, bars and restaurants, including St Kilda’s The Esplanade.
The AVC deal came after PAG took control of Craveable Brands – home of Red Rooster, Chargrill Charlie’s, Chicken Treat and Oporto – and frozen food brands Four’Twenty, Patties and Nanna’s.
