Top city retail fires despite lockdown hit

The $210m Rundle Place deal shows there is still demand for quality malls in the right locations.
The $210m Rundle Place deal shows there is still demand for quality malls in the right locations.

The coronavirus has slugged major regional malls while listed property groups with an exposure to Victoria have also been hit in recent days as lockdowns return.

Vicinity Centres shares edged up on Thursday after days of heavy falls due to its heavy weighting to Melbourne.

Broker Credit Suisse also cut earnings guidance on local Westfield owner the Scentre, saying that after COVID-19 major retail groups would look to reduce their store footprints.

But it says they will still want physical stores in quality, well-­located malls, and city retail centres in other capitals are ­already trading.

One mall is about to change hands in Adelaide in what will become the largest retail property deal in the wake of the pandemic.

Private equity group Blackstone is selling Adelaide’s Rundle Place for about $210 million and the deal shows a way forward for the sector with some repositioning likely by purchaser Fortis Funds Management.

Savvy property investors are starting to buy city malls that have longer-term potential. Retailer David Jones is close to selling the site of its flagship menswear store in Melbourne’s famed Bourke Street shopping precinct, with a $120m sale to Newmark Capital being finalised by CBRE.

The pending deals are being closely watched as they will provide a benchmark for city shopping centres that have been under pressure since the coronavirus crisis struck in March.

The Adelaide deal would see Blackstone exit profitably and leave Fortis to work up strategies for some empty space that it is confident of undertaking as Adelaide retail is operating with few restrictions.

The transaction also points to the split picture emerging for city retail, with some areas slugged, particularly in the heart of Melbourne and Sydney, whereas Perth, Adelaide and Brisbane are back trading.

Fortis knows inner city retail well and last year teamed with Singapore’s SC Capital Partners Group to buy the Central Park retail assets in Sydney for $174.5 million.

It is an experienced retail hand that has also bought smaller malls from listed companies and then turned them around. It could apply these skills in Adelaide where some space is vacant.

The Adelaide property went on the block last year and Cromwell considered a counter-cyclical play but dropped this plan. Funds manager AMP Capital also looked at buying the Adelaide retail asset but did not proceed.

Some players have pulled back as uncertainty surrounds the income of many retail centres and ­department stores struggle to gain traction.

However, the asset is part of a larger CBD complex and is trading well, particularly as new towers are built in Adelaide, boosting its trading area, and city retail had been promoted as a growth area before the pandemic truck.

Sam McVay of McVay Real Estate and Guy Bennett of Knight Frank are handling the deal. The parties would not comment.

Rundle Place, completed in 2013, is a five-level shopping centre on a prime location on Rundle Mall. It has a 506-space carpark.

The centre comprises more than 23,000sqm of retail space and is anchored by a full-line Coles supermarket. Department store Harris Scarfe closed its store last year but the centre still has an Apple store and national specialty and mini-major chains.

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