Local council buys Sydney neighbourhood shopping mall for $105 million
A local council has bought a neighbourhood shopping centre in Sydney’s north-west for $105 million, beating out investors and developers.
In what it labelled a strategic move, the Hills Shire Council purchased the Castle Mall in Castle Hill to boost its revenue and its position as a landowner.
The two-level neighbourhood shopping centre adjoins other council-owned sites in the Castle Hill CBD, including a car park and a former medical building that will be a Sydney Hills campus for the University of Canberra.
The Hills Shire Council general manager Michael Edgar said the council’s strategic investment portfolio provides a revenue stream outside of rates and fees that fund vital community services.
“The purchase of Castle Mall will not only help to boost council’s annual income, but it also means as a landowner, we can carefully plan a future for the whole site, from Castle Mall down to the university,” Mr Edgar said.
“This puts council and the community in a great position in the future, even though it will remain a community shopping centre for the foreseeable future.”
Castle Mall, which has a total gross lettable area of 9652sqm, was sold by Queensland government-owned investment company QIC, which also owns the nearby and much larger Castle Towers shopping centre that has more than 110,000sqm floor space in Castle Hill.
QIC Real Estate managing director Michael O’Brien said the sale of Castle Mall, at $105 million and a fully-leased initial yield of approximately 4.1%, was a pleasing result for investors and QIC.
“The property was highly sought-after and resulted in a very competitive bidding response from about a dozen buyers, ranging from institutions, private investors, developers and syndicators,” Mr O’Brien said.
“QIC continues to be focused on activating its retail-anchored mixed-use town centre masterplan for Castle Towers. As Castle Mall does not form part of this masterplan, it was surplus to our needs.”
Stonebridge Property Group and McVay Real Estate handled the sale, with Stonebridge partner Philip Gartland saying Castle Mall attracted strong interest.
“Demand for this asset was extremely strong, reflecting the market’s appetite for prime Sydney assets with strong underlying demand,” he said.
Mr Gartland said the agents received 175 enquiries, 42 data room applications and 14 first round offers, while multiple unconditional contracts were lodged at the end of the expressions of interest process.
Stonebridge partner Lincoln Blackledge said Castle Mall attracted both investor and developer interest.
“Castle Mall was very attractive to both investors and developers, creating a very competitive process with both domestic and offshore capital participating,” Mr Blackledge said.
“In an uncertain construction cost and interest rate environment, developers are increasingly seeking land with holding income and are bidding aggressively to secure such assets.”
Castle Mall is anchored by TK Maxx, Tong Li IGA Express and the Castle Hill Medical Centre, and has three mini-major retailers plus 35 specialty shops.
Neighbourhood shopping centres have been highly sought-after by investors during the pandemic, as local and convenience-based malls benefit from people shopping locally.
The council said the purchase of Castle Mall was made possible from past investments.
“Our financial management strategies have long included a strategic property portfolio that works to bridge funding gaps, ensuring council has the resources to provide essential infrastructure and services,” Mr Edgar said.
“It is essential that council continues to look for revenue sources outside of rates and user charges to enhance our capacity to deliver for residents.”