This article is from the Australian Property Journal archive
UNLISTED property fund manager ISPT is selling its 50% interest in the $276 million Cranbourne Park Shopping Centre in Melbourne’s south-east corridor.
The sub-regional centre, which is managed and co-owned by retail giant Vicinity Centres, is underpinned by 7.51-hectares of freehold land and its position as the largest retail centre in the total trade area, with specialty productivity exceeding $10,000/sqm.
The centre is anchored by Coles, Target, Kmart and Harris Scarfe, alongside an extensive tenancy mix including, 25 food catering tenants, 29 apparel tenants and 23 retail service providers, and boasts 97% occupancy.
Nick Willis, Sam Hatcher and Stuart Taylor from JLL’s retail investments team, alongside Justin Dowers, Carl Molony and Philip Gartland from Stonebridge, have been appointed to manage the sale via an expressions of interest campaign, on behalf of ISPT.
Vicinity valued its 50% stake at $138 million as at June 2024 on a cap rate of 6.5%, which is a slight improvement on the $133 million at December 2023, but below the December 2022 valuation of $142.90 million and June 2022 of $147.50 million.
Fund manager ISPT announced it was moving away from the retail and office sectors to instead focus on industrial, health and life sciences sectors, though it recently increased its investment in Fort Street, which boasts a $700 million portfolio of 12 neighbourhood centre and sub-regional assets.
Having also announced plans for its third major office retrofit, with a $170 million investment into a property it looked to offload last year, in 270 Pitt Street.
Cranbourne Park Shopping Centre underwent a $113 million revitalisation and expansion back in 2015, resulting in a further 12,500sqm of retail space and the addition of a food precinct.
“Opportunities to acquire a sub-regional asset in metropolitan Melbourne are rarely available, the offering is the second to be formally offered this year in Melbourne,” said Molony.
“The asset is underpinned by strong population growth and over 55,500 dwellings forecast to be developed within the direct trade area of the Centre, driving strong forecast retail spending.”
After more than half a decade of repricing and challenging fundamentals, the retail property sector is finally seeing a return of demand on a relative value basis with yield expansion milder than other core commercial property markets.
Just last week saw Queensland’s biggest retail transaction in 2024, with the Dexus Wholesale Property Fund and Melbourne-based fund manager Fawkner trading the Willows Shopping Centre in Townsville in a $212 million deal.
While Wyndham Vale Square and Drouin Central neighbourhood shopping centres sold in March to private investors for a combined value in excess of $45 million.
In August, HMC Capital picked up Brandon Park Shopping Centre in Melbourne’s south-east for $107 million from Chris Langford’s Newmark Capital who acquired by Newmark Capital in 2017 for $135 million, before abandoning revitalisation plans in April.
With Vicinity Centres has taking a half stake in Lakeside Joondalup for $420 million from the Future Fund, while its major rival Scentre Group has recently paired with Barrenjoey to double-dup 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.
The Cranbourne asset’s primary trade area is currently undergoing an annual growth rate of 2.5%, up on the Greater Melbourne average by 47%.
“Capital is taking a keen interest in the sector, with new waves of investment pouring in. We have witnessed an impressive influx of $886 million in maiden capital over the past 12 months, and this is only on the rise,” said Hatcher.
“Moreover, our bid data for retail properties is increasing, particularly across the APAC region where retail garners the highest level of engagement, averaging an impressive 6.5 bids per on-market opportunity.”
The centre benefits from recent infrastructure upgrades to the area, with the Narre Warren – Cranbourne Road upgrade and the Cranbourne Station upgrade amounting to an almost $1.5 billion investment.
The asset also boasts more than 500 metres of frontage to South Gippsland Highway, which sees 18.6 million drivers pass through annually.
“Given the high-quality management in place and the significant refurbishment, the offering of Cranbourne Park provides capital a unique opportunity to get set in a core metropolitan Melbourne asset,” said Willis.
“We anticipate interest from domestic private investors and syndicators, who have been the largest buyers of retail over the past three years, totalling some $12.9bn. Further given the fundamentals of this asset we expect interest from a range of offshore investors and funds looking to re-engage in the sector.”
The expressions of interest campaign for Cranbourne Park Shopping Centre is scheduled to close on 9 October 2024.
