APPF sells Westfield Marion half-stake to Singapore’s SPH REIT for $670 million – the year’s highest priced shopping centre deal

Lendlease-managed Australian Prime Property Fund (APPF) Retail has sold a half share of Adelaide’s Westfield Marion for $670 million – a 2.9 per cent discount to its 30 September, 2019, book value.

The asset was expected to trade for about $740 million when it hit the market in April, which would have been about consistent with a then-valuation of $737.5 million.

That said, $670 million is still the highest price paid for an Australian retail offering this year.

It has been acquired by a Moelis Australia managed investment vehicle fully capitalised by Singapore’s SPH REIT Management.

The Westfield Marion deal comes a day after we reported that Vicinity Centres sold a quarter of Brisbane’s Mt Ommaney Centre, and a 100 per cent stake of the Corio Central complex in Geelong – the latter for $101 million, also at a discount to book value.

All three deals were negotiated by new CBRE recruit, Simon Rooney.

With Westfield Marion, Mr Rooney was assisted by Colliers International’s Lachlan MacGillivray.

Westfield Marion

In Oaklands Park, about 13 kilometres south west of the Adelaide CBD, Westfield Marion includes 136,837 square metres of area and parking for 5549 vehicles.

It is Australia’s 11th largest shopping centre by size.

The centre occupies a 22.9 hectare site with long-term mixed-use redevelopment potential.

According to Shopping Centre News’ Big Guns report, Westfield Marion is Australia’s 20th ranked, assessed by Moving Annual Turnover per square metre (which is $11,353), and 13th, ordered by moving annual turnover value ($839.34 million).

This moving annual turnover is 61 per cent above its nearest South Australian competitor.

David Jones is one of the tenants. Westfield Marion also contains 310 specialty stores.

ALDI, Big W, Bunnings, Coles, David Jones, Harris Scarf, Kmart, Myer and Woolworths are amongst the major occupiers. The complex also contains 310 specialty stores and an event cinema.

“Westfield Marion was attractive to buyers due to its location, dominance within its trade area and trading history,” APPF Retail said in a statement.

“The sale represents a significant milestone for the fund as it works through a process of providing liquidity for a number of its investors,” it added. “The Fund is well positioned to implement a range of options to meet remaining requests”.

APPF Retail fund manager David McNamara said the divestment “represents a significant result for investors in the current market”.

“APPF Retail has a portfolio of high quality, dominant assets located in strong and growing trade areas. While the sector is evolving in response to a number of global thematics, the fundamentals for Australian retail remain positive with a long-term stable economy, continued population growth and controlled planning.

“Technology, demographic shifts and urbanisation are some of the key trends influencing consumer spending habits. The fund is well positioned to capitalise on emerging opportunities presented by these trends over the medium term, utilising the broader place creation capabilities of Lendlease.”

The sale represents the largest single asset retail transaction in Australia this year

CBRE and Colliers International said the Westfield Marion deal is Australia’s largest single asset retail transaction this year.

It is also one of the largest globally for 2019, the brokers added.

Susan Leng Mee Yin, chief executive officer of SPH REIT Management said the acquisition “deepened SPH REIT’s presence in the Australian market” (the investor acquired its first Australian asset, Sydney’s Figtree Grove Shopping Centre, in December 2018).

“The acquisition will enhance the sustainability and resilience of SPH REIT’s returns to unitholders through the increased geographic diversity, larger freehold land tenure, and longer underlying leases with embedded rental growth potential.

“This transaction and our co-ownership with Scentre Group marks another significant milestone in expanding our presence in a country and sector with growth prospects. We are pleased with this opportunity to partner Scentre Group, the premier developer and operator of Westfield Shopping Centres in Australia, as well as to strengthen our existing relationship with Moelis Australia,” Ms Leng said.

Moelis Australia managing director and head of Real Estate Asset Managemet, Chris Monaghan, added it looked “long and hard” for investments which matched its clients’ criteria.

“Their criterion centres around best in class and Marion clearly is that.”

Westfield Marion is in Oaklands Park, about 13 kilometres south west of the Adelaide CBD.

Mr Monaghan said that Scentre [which manages Westfield-branded complexes including Marion and retains the other half share interest] was best in class when it came to shopping centre management and development and both Moelis and SPH REIT were excited at the prospect of working with Scentre going forward.

“We are confident that Marion will perform strongly for them and that the co-ownership with Scentre Group will benefit both sides of the ownership. Marion is one of Australia’s strongest trading fortress malls, so we are pleased to have it as part of our client’s portfolios,” Mr Monaghan said.

Mr Rooney said; “Demand for core real estate in the Australian retail market remains consistent, primarily and increasingly so from major offshore investors.

“Having been historically priced out of the market by domestic funds, offshore investors are clearly attracted by the opportunity to acquire strategic interests in dominant, high-quality, “fortress-style” retail assets. These assets, offering best in class managers and attractive, low-volatility returns, are seldom offered to the market.”

Mr MacGillivray added the fundamentals of Australian retail “remain attractive from a global perspective, with population growth among the strongest of the OECD countries, low supply per capita and a stable economy, while a recovery in wage growth to drive discretionary spending.”

The Marion purchase demonstrates confidence in the South Australian retail market, boosted by significant investment in Adelaide, including a $90 billion investment in the defence sector, the recently completed $3.6 billion Adelaide BioMed City and tourism spend reaching $6.9 billion in the 12 months to September 2018, the agents said.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco
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