PAG hits its straps with $465m shopping centre purchase in Perth

Supplied Editorial Vicinity Retail Partnership and a Vicinity Centres mandate clients to sell the Midland Gate Shopping Centre

Vicinity Retail Partnership and a Vicinity Centres mandate clients to sell the Midland Gate Shopping Centre

Hong Kong-based private equity and real estate house PAG is teaming with local funds house Fawkner in a bid to acquire the Midland Gate shopping centre in Perth for about $465m.

The pair’s move reflects the dramatic shift in shopping centre values since the coronavirus crisis with malls marked down heavily as big companies look to exit and more opportunistic buyers emerge.

The mall is being sold by a mandate client and an unlisted partnership run by the listed Vicinity Centres, which is backed by the Future Fund and Canada Pension Plan Investment Board.

The centre first went on the block in 2019 ahead of the pandemic and the owners had expected about $650m at that time for the property.

The mandate client, Commonwealth Bank Group Super, has a 50 per cent interest, with the remaining half share controlled by the Vicinity Retail Partnership. They decided to exit after a $100m redevelopment of the mall was finished in early 2019 and the property almost traded last year.

At that time, growing funds manager Elanor Investors Group emerged as a suitor for the Perth centre for a price of about $530m but a deal was not completed.

The retail property sector is performing well in the wake of the pandemic and is bouncing back operationally after assets were heavily written down. But interest rate hikes could hit their performance as consumer spending slows.

The deal is being handled by CBRE’s Simon Rooney and Colliers’ Lachlan MacGillivray and includes the centre’s management rights.

The regional shopping centre‘s overhaul gave it a grip over Perth’s sprawling outer eastern suburbs. The prominent centre occupies a substantial 14.4ha town centre site at the gateway to a growth corridor.

Comprising a gross lettable area of 68,600sq m, it is anchored by a triple supermarket offer of Coles, Woolworths and ALDI, in addition to discount department stores Kmart, Big W and Target and an eight-screen Ace Cinemas complex.

The sale will mark another breakthrough for major centres which are now starting to trade, with Cairns Central now also in sights of funds house Haben for close to $400m.

Big listed investors have been looking to cut their exposures and under-pressure managers have been selling to meet redemption requests from superannuation funds.

The pricing shift has drawn offshore and private local capital who see an opportunity to acquire landmark properties and then ride an eventual recovery by repositioning the malls.

PAG has emerged as a property player at this time in the cycle and earlier this year snapped up a Sydney office block from the listed Dexus for about $393m, showing a 17 per cent discount to its previous valuation.

PAG separately completed the $1.4bn acquisition of the Australian Venue Co pub operation which it picked up from private equity firm KKR.