Lendlease sells Adelaide mall stake for $670m
In one of the most anticipated deals of the year, Lendlease has sold a half share in Adelaide’s Westfield Marion for $670 million to the property trust sponsored by Singapore Press Holdings at a discount of more than 9 per cent to its book value.
The price – and its discount to book value – has been eagerly awaited by the market for the benchmark it will set for the valuation of major malls in this country.
Lendlease’s investment arm was forced to put its half stake in Adelaide’s biggest mall on the market in April as it sought to meet as much as $2 billion in redemption requests from its unlisted retail fund.
At the time the 50 per cent share in the mall was valued at $737.5 million, which was the book valuation for the remaining stake held by the shopping centre’s co-owner, Scentre Group.
The opportunity to take a significant position in one of the largest malls in the country – Westfield Marion has the 13th highest turnover nationally – has been seen as a major test for the market as property investors reassess how to best manage their exposure to the changing retail environment.
As foreshadowed in Street Talk, the Singaporean player had emerged as the likely buyer as early as July. Before a deal could be completed though, Scentre had to be offered its pre-emptive right to acquire the remaining half share.
Singaporean-listed SPH REIT, which is sponsored by the media conglomerate Singapore Press Holdings, announced its $670 million acquisition of a half stake on Thursday night.
To hold the acquisition, Moelis Australia has created an investment vehicle which is fully capitalised by SPH REIT.
“The acquisition deepens SPH REIT’s presence in the Australian market and follows on from our first asset acquisition of Figtree Grove Shopping Centre in December 2018,” SPH REIT’s chief executive Susan Leng Mee Yin said.
Last year, SPH REIT joined with Moelis Australia to buy the Figtree Grove shopping centre in Wollongong in a $206 million deal from private equity player Blackstone.
Lendlease’s investment arm, APPF, produced a revaluation of its half stake before the mall deal was concluded. The September 30 value was $690 million. The deal price represents a 2.9 per cent discount on that valuation.
“The divestment of the fund’s interest in Westfield Marion represents a significant result for investors in the current market,” APPF Retail Fund manager David McNamara said.
“While the sector is evolving in response to a number of globalthematics, the fundamentals for Australian retail remain positive with a long-term stable economy, continued population growth and controlled planning.”
The deal was brokered by Simon Rooney of CBRE and Lachlan MacGillivray of Colliers International.
The deal showed that offshore investors were still attracted by exposure to dominant, high-quality, “fortress-style” retail assets, according to Mr Rooney.
That attraction, according to Mr MacGillivray, was due to the strong population growth in the Australian market while there was a relatively low supply of retail space per capita and a stable economy.
For Chris Monaghan, the managing director and head of real estate asset management for Moelis Australia, the excellence of Scentre as a manager and developer of malls was significant to its new co-investor.
“We are confident that Marion will perform strongly for them and that the co-ownership with Scentre Group will benefit both sides of the ownership,” he said.
“Marion is one of Australia’s strongest trading fortress malls, so we are pleased to have it as part of our client’s portfolios,” he said.
