Scentre, Barrenjoey pin down another Adelaide shopping mall bargain
The dealmakers at Scentre Group and Barrenjoey Private Capital Management are back sifting through Adelaide’s shopping malls for deep discounts.
Street Talk can reveal that the $17.7 billion group has wielded its pre-emption rights to acquire half of Westfield West Lakes from fellow listed landlord Dexus Group. Now, it is working with Barrenjoey Private Capital Management to syndicate the stake.
Scentre will pay $167.3 million for 50 per cent of Westfield West Lakes, the state’s third-largest shopping centre, which it reckons has the potential to add a hefty residential development. That’s a 10 per cent discount to the asset’s book value as of June 30, and 36 per cent lower than its peak valuation of $260 million a decade ago.
Of note, it comes a month after the duo bought half of Adelaide’s second-largest mall, Westfield Tea Tree Plaza, at a 12 per cent discount to the book value. In both cases, Scentre won’t hold the West Lakes stake on its balance sheet but will house it in a five-year vehicle, dubbed The West Lakes Opportunity Trust.
Fund-raising documents mailed out to wealthy clients on Wednesday, and obtained by this column, said the trust would look to raise $83.3 million for the deal’s equity slice. Potential investors have been told to expect 9.25 per cent initial cash distribution, and a 14 per cent to 16 per cent net internal rate of return, not including the plans to add more than 1000 dwellings at the site’s surplus car parks.
The site, spread across 20.4 hectares and located 12 kilometres north-west of Adelaide’s CBD, houses the usual suspects such as Coles, Woolworths and Kmart, and posted $471 million moving annual turnover last year, up 13 per cent since 2019. It is home to one of Adelaide’s three David Jones stores, and has added childcare and exercise facilities.
Value play
Naturally, Scentre and Barrenjoey want to unlock value in the shopping mall, and are looking to piggyback on Adelaide’s robust housing market where the median house is expected to cost $1 million by the end of this year.
Their pitch highlighted Westfield West Lake’s surplus car parks, which can be developed into 1000 dwellings, a stone’s throw from the Tennyson Beach shoreline. It would require planning code amendments but could be done in a “capital-light manner”, the pitch said.
Scentre Group’s chief financial officer, Andrew Clarke, and general manager, corporate, Josh Itzkowic, were listed by the flyer as the joint investment managers. Barrenjoey has seasoned real estate banker and former Credit Suisse Australia investment banking co-head Angelo Scasserra leading the charge.
The Australian Financial Review has previously reported that $2 billion worth of shopping malls are waiting to be traded in Australia.
