Scentre joins mall growth race
Big mall owners are signalling their long-term faith in the retail sector with Scentre Group, owner of the local Westfield empire, unveiling a major expansion of a Perth centre.
The West Australian capital has seen a run of shopping mall redevelopments, with some of the plans coming to fruition after delays prompted by ownership changes.
But now developers are pressing ahead with plans, some of which were recut in the wake of the pandemic.
Scentre has lodged plans for a $500m redevelopment of Westfield Booragoon, about two years since it took a stake in the property.
Once known as Garden City Booragoon, it was rebranded as Westfield Booragoon in 2019, when Scentre acquired a half stake in the precinct from an AMP Capital-run fund.
The AMP Capital Diversified Property Fund kept the remaining 50 per cent stake in the 72,843sq m centre, but that vehicle has since been merged with a Dexus-run diversified fund.
Scentre director of development Stewart White said that when the company acquired a 50 per cent interest in Booragoon in December 2019 from AMP – including long-term property management, brand and development rights – it had started pre-development work on a scheme to create long-term value for the co-owners.
The mall giant has lodged plans aimed at making Westfield Booragoon into Perth’s premier retail and lifestyle destination. The emphasis will be on fresh food, indoor and outdoor dining, fashion and entertainment after earlier plans for a $750m redevelopment were shelved
The expansions are taking place despite the impact of the coronavirus crisis on shopping centre values.
Perth was not hit by the pandemic after WA shut its borders and Scentre is hopeful its plans will see it lift its Perth holdings, which are competing with the recently revamped Karrinyup shopping centre, in the city’s northern coastal suburbs.
That centre has undergone an $800m redevelopment to become a fully integrated retail, entertainment and lifestyle destination. The push into retail goes against the trend of recent years, when Australians dived further online for shopping.
Karrinyup manager AMP Capital, on behalf of owner UniSuper, says the massive development – which will see the mall virtually double in size – is all about backing retail.
Other mall owners are branching into new sectors. Lendlease also has plans for an A-grade office development to adjoin Lakeside Joondalup, which it co-owns with the Future Fund, in Joondalup in Perth’s north.
Meanwhile pricing on malls is stabilising, with Scentre saying this shows that big companies have more confidence in the sector.
Just last week, the Dexus Wholesale Property Fund paid about $410m for a 25 per cent stake in Sydney’s Warringah Mall. The DWPF now has a 50 per cent stake after buying the interest from the AMP Shopping Centre Fund.
The price equated to a 2.4 per cent discount to the latest Scentre carrying value and 12 per cent discount to its peak valuation in 2018. The capitalisation rate was about 5 per cent.
“The price is relatively consistent with recent transactions, again suggesting current book values are fair and the asset class has rebased about 14 per cent of peak pre-Covid valuations. The listed retail REITs continue to trade at implied book value declines of about 25 per cent peak to trough,” JPMorgan analyst Richard Jones said.