Dexus circles $830m of malls to catch retail wave
Listed property giant Dexus is on the hunt for a major shopping centre, circling Woodgrove Shopping Centre in Melbourne’s west and Erina Fair on the NSW Central Coast, amid a resurgence in investor interest in the sector.
Dexus has emerged as the frontrunner among prospective buyers in talks to acquire Woodgrove mall from Queensland’s sovereign fund QIC. The shopping mall is expected to trade for about $450 million – a price that would fall slightly under the book value of $475 million, according to multiple sources familiar with sales discussions.
Dexus is also considering a half stake in Erina Fair, owned by South Korea’s National Pension Service, for about $380 million.
The listed property group’s interest in the two shopping malls comes after it ended up as the underbidder for the recently sold half stake in Joondalup Centre, which was acquired by Vicinity Centres for $420 million, sources said.
While Dexus is best known for being Australia’s largest office landlord, it has about $9 billion worth of retail assets under management. It controls co-ownership stakes in nine Westfield shopping centres, held primarily in its Dexus Wholesale Property Fund and Dexus Wholesale Shopping Centre Fund.
Investor interest from Dexus and others in major shopping centres is on the rise as consumer spending at shopping centres holds up despite rising cost-of-living pressures. Listed shopping centre operator Scentre Group reported sales in its Westfield malls hit a record $20.2 billion in the nine months to the end of September, a 2.3 per cent increase compared to the corresponding period a year ago.
Landlords and major investors are betting that lower interest rates and resilient spending at shopping centres will drive further growth in large shopping malls, which has in turn sparked a resurgence in shopping centre deals.
The volume of such deals has surpassed last year’s levels, recording over $11 billion in transactions, driven by an increase in purchases of regional, major and super-regional centres, according to MSCI data. Transactions for these bigger malls in the first three quarters of 2024 have increased by 53 per cent from last year, reaching volumes not achieved since 2018.
Notable deals from this year include QIC selling its Westpoint shopping centre in western Sydney’s Blacktown for a record $900 million, as well as listed shopping centre operator Scentre pairing up with investment house Barrenjoey to acquire a 50 per cent share in Westfield Tea Tree Plaza and Westfield West Lakes in July.
The landmark David Jones building in Bourke Street, Melbourne is also set to be sold to funds house IP Generation for about $220 million.
“Investors have sought to capitalise on robust population growth and expected rate cuts in 2025 that may ease pressure on household finances, thereby increasing disposable incomes,” MSCI Pacific real estate research head Ben Martin-Henry said.
As Dexus looks to expand its retail exposure, it is also being compelled to sell one of its prized retail assets, held in a managed fund. Last week, the NSW Supreme Court directed that the wholesale fund operated by Dexus sell its half stake in Macquarie Centre to Cbus and Unisuper for $830 million, after the superannuation giants successfully argued that they had the right to take over the entire shopping mall.
Dexus is considering whether to appeal the decision.
Meanwhile, if the Woodgrove deal goes ahead, it would mean QIC has sold over $1.55 billion worth of shopping centres in less than six months; the fund secured the $900 million Westpoint sale and sold its half stake in Perth’s Claremont Quarter for $207 million.
Dexus declined to comment. The agents managing the Woodgrove sale process, JLL’s Sam Hatcher and Nick Willis and Colliers’ Lachlan MacGillivray, declined to comment. CBRE, which is handling Erina Fair’s sale, declined to comment.
