AMP Capital opens the door for major mall exit in the west
AMP Capital is sounding the market for a potential divestment of the $1.2 billion Garden City mall in Perth, the largest asset in a diversified property fund it manages.
The fund manager is canvassing various options for the super-regional mall at Booragoon south of the CBD: from bringing in an investment partner as a joint owner ahead of a redevelopment, all the way through to a complete exit.
A full sale would constitute one of the largest single retail asset transactions in recent times, eclipsing the $800 million-plus acquisition of a half-stake in Indooroopilly mall in Queensland two years ago through two AMP Capital-run funds.
The mooted divestment comes amid intense interest on values in a sector that has come under pressure from weaker consumer sentiment and the structural challenge of e-commerce.
Potentially setting a benchmark for the sector is the looming sale of a half- stake in Westfield Marion in Adelaide that is being divested the Lendlease-run APPF Retail fund as it faces as $2 billion in redemption requests. That process is understood to be nearing a conclusion.
AMP Capital itself has already experienced some of that pressure, recently writing down more than 10 per cent of its acquisition of Indooroopilly.
Garden City is held in the $5 billion AMP Capital Diversified Property Fund on a capitalisation rate of 4.75 per cent, tighter than the 5 per cent booked a year earlier.
The fund does not have designated redemption windows during which its wholesale investors can ask to withdraw their investment, a situation faced by the APPF Retail fund.
Instead, the AMP Capital-run fund has an ”ongoing liquidity” mechanism, allowing investors to seek withdrawals at any time.
Along with any need to fund such requests – AMP Capital declined to comment on that issue – the Perth mall is almost three times the value of the next-largest asset in the diversified fund.
Also driving the search for an investment partner, if not outright sale, is the mall’s potential for a $750 million redevelopment that would expand its retail footprint from 72,000 square metres to 120,000 square metres.
Those plans have been approved and include an expanded David Jones store joining an existing Myer and Kmart, two new full-line supermarkets, a casual dining and leisure precinct, a new Hoyts Cinema complex and large- format international fashion retailers. The mall is already home to Apple and Zara.
Colliers International and CBRE are expected to be appointed formally within days to broker a potential transaction.
“The asset represents a major investment and asset concentration for the fund that has a strong development pipeline. As with Quay Quarter Sydney, AMP Capital is considering all options available including bringing on a capital partner,” a spokeswoman said.
“Garden City has planning approval for a major expansion and AMP Capital is exploring a number of significant investment options in the centre.”
As retail landlords reassess how to best manage their exposure to the changing retail environment, as much as much as $11 billion worth of malls could hit the market in coming months, a glut that is almost certain to send retail values lower, according to a recent Citi analysis.
