Australian Unity sells half Geelong shopping centre stake

Australian Unity Retail Property Fund has sold its stake in Waurn Ponds Shopping Centre.

Fund manager Australian Unity has offloaded its half-stake in a $300 million shopping centre in the regional Victorian centre of Geelong, helping cut into the estimated $11 billion worth of shopping centres on the market.

The number of centres available has made landlords nervous about their value and major groups Stockland, Vicinity Centres and Lendlease’s funds empire have flagged they will offload more malls.

However, the unlisted Australian Unity Retail Property Fund says it has sold its 50% interest in the Waurn Ponds Shopping Centre to co-owner ISPT, indicating deals are being struck for high-quality properties.

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Australian Unity and ISPT transformed the centre into one of the state’s top regional complexes and it was also chased by Mirvac and Charter Hall.

Colliers International’s Lachlan MacGillivray handled the sale but declined to comment on pricing, as did the parties.

Australian Unity has previously says it may achieve a “strong sale outcome” for the fund’s 50% interest in the property, compared to its one-time book value of $140 million.

“If this is realised we expect a material uplift in the fund’s security price,” Australian Unity told investors earlier this year.

Geelong’s economy is diverse and resilient and we see real potential for sustainable growth over the long term as people take advantage of the lifestyle and commuting options available

The centre is anchored by a Coles, Kmart, Target and Woolworths, Reading Cinemas and sports about 133 speciality retailers. Australian Unity sold a half-stake in the complex to ISPT in 2014 after it was redeveloped

Australian Unity says it will review the fund’s strategy, including the timing for a special distribution resulting from the sale.

ISPT says its main Core Fund has acquired the remaining interest and flagged further development of the property.

“The acquisition was a compelling opportunity for the fund, securing full control over this asset which has a strong yield, attractive return outlook and favourable location in a key growth corridor,” the fund manager says.

ISPT says there is the potential for mixed use opportunities on the site. The centre sits on a large 24ha holding, of which 7.6ha is vacant land, providing opportunities to develop the site into a mixed-use precinct in future.

ISPT Core Fund manager Mark Bassett cites the fast growing and dynamic catchment area.

“Geelong’s economy is diverse and resilient and we see real potential for sustainable growth over the long term as people take advantage of the lifestyle and commuting options available,” he says.

Other deals are in train. Notably, Cromwell Property Group is targeting the purchase of the $250 million Rundle Place retail property in the heart of Adelaide. The counter-cyclical play would see it pick up the mall from US private equity firm Blackstone.

But concerns remain about the hefty amount of retail property for sale, with Citi estimating an $11 billion overhang of assets, which has built quickly, after a long period of relative stability. Citi argues that, on average, book values could fall by about 9%.

“Historical precedents, as well as the US/UK experience, both suggest the declines could be larger again,” Citi says.

Citi reiterated its sells on Scentre, GPT, Charter Hall Retail REIT, SCA Property Group and the BWP Trust, while downgrading Stockland to a sell: “We expect falling values could weigh heavily on retail landlords’ share prices, and maintain our clear preference for non-retail exposure in the Australian REIT sector.”

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