Scentre plants $720m in Eastgardens

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IN one of Australia’s largest-ever single asset retail transactions, Scentre Group has acquired a half share in Sydney’s Westfield Eastgardens for $720 million, and is looking at options to enhance the strongly-performing mall’s offering amid the difficult retail climate.

Westfield Eastgardens is one of the top 30 shopping centres in Australia, with total retail sales of more than $600 million each year. Scentre Group, which manages the asset, is now its joint owner in an even partnership with Terrace Tower Group.

The centre is anchored by Myer, three discount department stores including Kmart, Big W and Target, three supermarkets in Woolworths, Coles and Aldi, a Hoyts cinema, six mini-majors, 230 specialty shops and kiosks, and 3,263 parking spaces.

Located at 152 Bunnerong Road, the centre was built in 1987 before expansions in 2002 and 2013, and now has a total lettable area of around 84,220 sqm.

According to brokering agent Simon Rooney of JLL, the deal reflects a capitalisation rate of 4.25%.

The sale price comes in behind Australia’s benchmark retail transaction figure of $800 million, paid by two AMP Capital fund for a 50% stake in the Indooroopilly Shopping Centre in November last year, which reflected a yield of below 4.5%.

In July last year, the Besen family sold their remaining 25% interest in Highpoint shopping centre in Melbourne’s west to GPT for $680 million, at a 4% yield.

Scentre Group chief executive officer, Peter Allen said Westfield Eastgardens has significant development potential for both retail expansion and mixed-use development, give its location within an area that is undergoing substantial renewal.

“The centre presents redevelopment opportunities including the introduction of international fashion retailers and expansion of the dining, entertainment and lifestyle offering. In addition, Westfield Eastgardens offers a unique opportunity to create value through mixed-use development including commercial, accommodation and education facilities.

“In line with the group’s strategy, this transaction is a rare opportunity to invest in one of the highest quality ‘living centres’ in Australia.

“Westfield Eastgardens is regarded by planning authorities as one of Sydney’s ‘strategic centres’, with a trade area that has strong forecast population growth and investment in infrastructure, including increased public transport,” Allen said.

Rooney said the competitive pricing reflects the strong trading performance of the asset, growth in the trade area, improving socio-demographic profile and the improved connectivity of the new South East Sydney Light Rail.

“Investors were attracted to the future mixed-use/residential opportunities of the site and the imminent retail redevelopment potential to enhance medium and long-term returns.

“There is strong investor appetite for major, core retail assets within the Sydney metropolitan area which are rarely available to purchase and are benefiting from supportive demographics and the solid New South Wales economy,”

Rooney said investor sentiment is very positive towards core retail assets such as major regional shopping centres.

“Owners are repositioning their portfolios towards defensive and high quality retail assets, which will continue to attract leading retailers and capture a growing share of consumer spend.”

Terrace Tower Group was founded by Westfield co-creator John Saunders.

Australian Property Journal