Vicinity’s $96m exit at Pilbara mall opens door for syndicator
Retail real estate giant Vicinity Centres and its co-investor Challenger have sold a shopping centre in remote Western Australia for $95.9 million to a Melbourne syndicator in the latest example of how smaller malls are being traded down into unlisted funds.
In the Pilbara region in the north of the state, the Karratha City shopping centre is regarded as a sub-regional mall and the shopping focus for mining industry workers and their families.
“The sale is another example of Vicinity executing its active investment program to recycle capital to fund developments and acquire premium, destination assets aligned with our long-term strategy,” a spokeswoman for Vicinity said.
The deal was struck roughly in line with the mall’s December book value, which had retreated slightly from its last published book value of about $100 million last June. At that time, the mall’s capitalisation rate, akin to an expected yield, was 7.75 per cent. The mall’s peak value was about $115 million close to a decade ago.
For Vicinity, the sale is the latest in a run of exits from smaller assets as it looks to drive an ambitious development program at some of its best-known shopping destinations, including Chadstone in Melbourne – the country’s single largest mall which it co-owns with Rich Lister John Gandel – and Chatswood Chase in Sydney.
At its interim result this year Vicinity confirmed had divested $315 million of real estate. Since then, the sell-down has continued with its divestment last month of Halls Head Central mall, also in Western Australia, for $70 million, which it had owned jointly with ISPT.
In April, property investor Realside struck a deal to buy Maddington Central, a shopping centre 17 kilometres from Perth’s central business district, from Vicinity for $107 million.
The Karratha deal – brokered by CBRE’s Simon Rooney – is also the most recent example of how boutique fund managers including Fawkner, IP Generation, Haben and others, have become beneficiaries as the major landlords look to recycle capital.
Based in Melbourne, Fawkner Property has steadily rolled out a series of retail real estate funds typically comprising a larger shopping mall and a number of smaller retail outlets
The fund manager has bought steadily into that trend, creating a $3.5 billion portfolio of convenience, childcare, and retail properties, including 28 assets in Western Australia alone.
Last year it bought Midland Gate for $465 million together with Asia-based investor PAG. In another deal two years earlier, it acquired The Square Mirrabooka in Perth through a $195 million off-market deal from the real estate empire created by billionaire Stan Perron.
On a single-level, Karratha City boasts one of the most productive Woolworths supermarkets in the state as well as one of WA’s best-performing KFC outlets. It first opened in 1986 and comprises close to 23,000 square metres of retail space.
Its other retailers include Kmart, The Reject Shop, Karratha Furniture & Bedding, Retravision and Red Dot, alongside 51 specialty stores and kiosks, an ATM and three pad sites.
