Local investors swoop on shopping centres
Sales of shopping centres are picking up, with wealthy local investors leading the charge in buying some supermarket-based centres and increasingly larger assets that are recovering from the crisis.
Buyers have splashed out more than $200m in recent days, including listed retailer Harvey Norman and funds manager Primewest, with the private group headed by businessman Colin DeLutis making the latest purchase.
In one of the largest retail deals of the year, his DeGroup swooped on the CS Square complex in Melbourne that was sold out of the Lendlease-managed Australian Prime Property Fund Retail as it deals with about $2bn in redemptions.
APPF Retail unloaded the centre to DeGroup for $136.5m, with the triple-supermarket and discount department store-anchored shopping centre in the Caroline Springs Town Centre, in Melbourne’s northwestern suburbs, chased by a big field of investors.
DeGroup already owns a portfolio of convenience and service-focused centres and wanted to take a step up into larger assets.
“We also see a major opportunity to take advantage of the current market dislocation in pricing between subregional yields and bond rates, which we expect to continue for some time to come,” Mr DeLutis said. “The defensive nature of the asset is further strengthened due to its significant proportion of income derived from national businesses and importantly a centre [lease term] in excess of seven years.”
Queensland state-backed fund manager QIC sold the Robina Home + Life Centre on the Gold Coast to a new Primewest fund for $66m, and the Watergardens Homeplace in Taylors Lakes, in Melbourne’s northwest, to Harvey Norman for $97m.
The run of sales shows that wealthy investors are increasingly confident in the sector as they have bought assets from large institutions running wholesale funds. These are under pressure from their backers to unload retail properties and provide liquidity while the buyers believe they can revamp centres and turn them around.
CS Square was sought after due to its town centre location in Caroline Springs, value-add potential and mix of quality tenants. The sale included CS Commercial, a mixed-use precinct opposite CS Square, and 1.28ha of vacant land in two separate lots.
The 25,308sq m centre underwent its most recent expansion in 2019 and sold on a yield in the low 6 per cent range, in keeping with its pre-crisis value.
Lachlan MacGillivray of Colliers International and Carl Molony of Stonebridge Property Group brokered the sale.
The fund manager of APPF Retail, Anne MacSporran, said selling CS Square “represents a strong result for investors, especially in light of recent market conditions”.
“The outlook for Australian retail remains positive with sales stabilising post pandemic,” Ms MacSporran said.
“With the sector undergoing an evolution in response to changing consumer trends, APPF Retail is progressing its urban growth centre strategy, positioning our core assets to capitalise on mixed-use opportunities.”
Mr MacGillivray said the asset drew strong market demand owing to its quality, strong underlying fundamentals and value-add potential.
“We received unprecedented bidding from high-net-worth private investors, institutions, syndicators and international investors,” he said.
Mr Molony said the offer was a rare opportunity to buy an institutionally developed and owned town centre asset within a high-growth area of Melbourne.