Victorian deal shows the heat in small shopping centre market

Vicinity Centres CEO Grant Kelley. Picture: David Geraghty
Vicinity Centres CEO Grant Kelley. Picture: David Geraghty

Melbourne-based IP Generation has swooped on Mildura Central shopping centre in the regional Victorian town in an $81.1 million play showing the heat in the small shopping centre market.

The purchase from the Vicinity Enhanced Retail Fund sees IP Generation join the ranks of recent buyers of shopping complexes, which include businessman Colin DeLutis and Gerry Harvey’s listed Harvey Norman.

The heightened activity has prompted speculation that Vicinity would consider selling or spinning off its $1.6 billion worth of smaller centres, with Morgan Stanley suggesting the Grant Kelley-led company consider this in a research note.

The wholesale fund, managed by the listed Vicinity Centres, sold at a discount to when it last traded in late 2014, when the Enhanced Retail Fund bought it for $109.75 million.

Much of the discount could be attributed to uncertainty about whether discount department store Target would stay once its lease expires. In that case IP Generation is likely to undertake a repositioning or redevelopment.

Mildura Central is the dominant shopping centre in the region, occupying a landmark 7.35ha site in a key retail precinct near the town centre.

It is anchored by a strong performing Woolworths and the Target, with a tenancy mix that services a trade area that extends across the region.

The sale highlights the continued strong demand for high quality regional assets with dominant characteristics but also the recalibration of pricing after the crisis.

The deal was brokered by Lachlan MacGillivray of Colliers International.

“The sale of Mildura Central highlights that there is strong demand for regional assets with strong and dominant characteristics; the Mildura market is very resilient with good economic drivers,” he said.

IP Generation, run by former Impact Investment Group chief executive Chris Lock, was an active buyer ahead of the crisis.

It picked up a heritage brewery yard in Sydney’s Chippendale that is part of the broader Central Park development in 2019 for $16.5 million for a development.

IP Generation also bought another shopping centre, Corio Central, in Victoria from Vicinity Centres at a 3.8% discount to book value.

In 2018, in a joint venture with Melbourne-based investment firm Wingate, it also bought an Adelaide office tower in Grenfell Street for $103.5 million.

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