This article is from the Australian Property Journal archive
MAJOR shopping centre landlord Vicinity Centres has grabbed back the other half-share in Sydney’s Chatswood Chase for $307 million – some $255 million less than what it sold it for six years ago – and will press ahead with redevelopment plans as it optimises its portfolio.
The whopping 45% discount also reflects a 6.5% discount to the June book value at which Vicinity holds its existing 51% share.
Vicinity had sold the reacquired 49% stake for $562.5 million in a seismic deal with Singaporean sovereign wealth fund GIC in 2017, which also saw Vicinity pick up a half-share of the Queen Victoria Building, The Galeries and The Strand Arcade in the CBD for $556.0 million.
Vicinity harbours $620 million redevelopment plans for Chatswood Chase that will kick off in March next year, and is aiming for an October 2025 completion.
“Premium retail assets such as Chatswood Chase are a key pillar of our strategy and are an important enabler of resilient income growth and sustained value accretion through cycles,” said Vicinity’s CEO and managing director, Peter Huddle.
“Chatswood Chase is an iconic asset with strong growth potential. Our redevelopment plans represent one of the most exciting and transformational projects to be undertaken in Australian retail property today and for the foreseeable future and will reinforce this exceptional asset as northern Sydney’s premier retail destination.”
Vicinity also announced yesterday it had exchanged contracts with customary conditions to sell Roxburgh Village in Victoria to JY Group for $123 million, representing an 8.8% premium to book value.
The sale is expected to settle in March 2024. Vicinity will continue to provide property management services at the asset.
The divestment follows Vicinity selling a 50% interest in the Broadmeadows Central for $134.5 million, representing a 5.2% premium to December 2022 book value, as well as the Broadmeadows Homemaker Centre for $20 million.
In the current financial year, Vicinity has also contracted to sell more than $40 million of non-core land parcels and adjacent properties at “meaningful premiums” to June 2023 book values, it said.
“These transactions demonstrate disciplined execution of our active investment program. We are recycling and allocating capital to fund value-accretive developments and acquisitions of premium assets aligned with our portfolio strategy while at the same time, preserving the strength of our balance sheet and credit metrics,” Huddle said.
Pro-forma gearing following the acquisition and redevelopment of Chatswood Chase, and the Roxburgh Village divestment will be 26.6. Additional project-related loss of rent from the acquisition is expected to be approximately $20 million, mainly in FY25.
Vicinity reaffirmed its FY24 funds from operations and adjusted funds from operations per security guidance of 14.1 to 14.5c per security and 11.8 to 12.2c.
Signs of activity in subdued market
The Chatswood Chase and Roxburgh Village deals land at a time when transaction volumes of commercial property in Australia sunk to their lowest level for a September quarter in more than a decade, according to MSCI Real Assets, with a “fog” on pricing, economic and geopolitical continuing to hamper deal activity
Retail asset sales tumbled 51% in the third quarter relative to a year earlier, with total activity for the year to date down at a similar rate of change.
The latest numbers from The Data App show the number of transactions per month in the three months to September was 6.7, down from 7.3 a year earlier and below the 12-month average of 7.2.
However, buyers have spoilt for choise – in the three months to September there was 400,000 sqm of shopping centres placed to the market. Only 160,000 sqm transacted, suggesting nearly 250,000 sqm of overhang.
Property fund manager ISPT has just put four landmark retail assets to the market, including the Melbourne CBD’s GPO building and The Strand Melbourne – it’s expecting $180 million from the pair – as well as Halls Head Central in Western Australia and Eastgate Bondi Junction in Sydney.
