Vicinity to sell down $600m shopping centre portfolio

The Grand Plaza shopping centre at Browns Plains, Queensland. Picture: Patria Jannides
The Grand Plaza shopping centre at Browns Plains, Queensland. Picture: Patria Jannides

A Vicinity Centres-run trust backed by the Future Fund and the Canada Pension Plan Investment Board will bring a $600 million portfolio of shopping centres to market as offshore groups jostle for position in the sector.

Shopping centres have traditionally been dominated by local groups but the landscape could dramatically change as a clutch of offshore groups prepare final bids for the $3.5 billion Blackstone retail property portfolio ahead of a July 10 closing date.

The Vicinity fund is selling half stakes in two centres — Grand Plaza and Rockingham — held in a wholesale trust that has two other backers, prompting expectations the remaining centre — Midland Gate — may also be sold, lifting the overall trade to around $1 billion.

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Brisbane’s Grand Plaza and Perth’s Rockingham will reap the benefits of the emerging recovery in Queensland and WA, with both markets past a trough of retail spending.

The Future Fund and the CPPIB pumped $750 million into the restructured Colonial First State Global Asset Management retail property fund in 2010.

They could now reap strong returns as the assets were overhauled and they reaped premium prices as centres were sold.

Charter Hall last month bought Salamander Bay Shopping Centre from the fund for $174.5 million.

Perth billionaire Stan Perron bought a half-stake in Queensland’s Runaway Bay Shopping Village for about $160m.

In 2015, the trust sold the Myer Centre in Adelaide to Singapore’s Starhill Global REIT for $288 million.

Vicinity has called in JLL’s Simon Rooney to sell the stakes in Rockingham and Grand Plaza in one line or individually.

The fund’s passive half interests in the centres are on the block with the listed Vicinity retaining its 50% stake and management rights.

This may deter rival listed operators, but passive stakes are in hot demand and Vicinity already has such tie-ups with super fund-backed ISPT, Challenger and Perron.

Regional shopping centres are very tightly held with only one deal since 2014 — a half-share in Westfield Woden in Canberra selling to Perron for $335 million last December.

Offshore investors are likely bidders for the Vicinity assets, with international players striking 32% of all retail deals last year. Many fund managers also have new mandates to invest in core markets across the Asia Pacific.

Rockingham sits in Perth’s southwest and spans about 62,314sqm of gross lettable area. It includes Coles and Woolworths supermarkets, a Kmart and Target, along with Ace Cinemas, specialty tenancies and parking for over 3200 cars. The site offers redevelopment plays including expanding the retail space and putting offices and apartments on a vacant block.

Grand Plaza Shopping Centre in Brisbane’s south is a 53,412sqm centre housing Target and Big W, Woolworths, Coles, and Aldi supermarkets, together with four mini-majors specialty tenancies and more than 2500 car parks.

The sales would leave only Midland Gate in eastern Perth, owned by Perron and the Vicinity fund to be sold. The group last month unveiled a $100 million refurbishment of that centre but declined to comment on Wednesday.

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