Mount Pleasant mall in the mix
The Mount Pleasant Centre at Mackay in northern Queensland has hit the market with expectations of $175 million or more, the latest offering to test the return of investor appetite for sub-regional malls.
The 22,519sq m mall is managed by ASX-listed Vicinity Centres on behalf of Commonwealth Bank Group Super. It stands on a much larger 86,760sq m site, creating potential development upside.
“All of the key major tenants – Coles, Woolworths and Kmart – combined perform above industry averages, as does the centre’s food, service and convenience-related specialty component,” said CBRE’s Simon Rooney, who is brokering the asset with colleague James Douglas.
“This aligns with an increasing cash allocation into the sub-regional retail sector and current investor demand for high-quality sub-regional assets, which have a strong non-discretionary focus and the ability to provide highly transparent, consistent and growing returns.”
The sub-regional category of malls, those which typically have a discount department store along with supermarkets and specialty tenants, has been the hardest hit in the retail sector over the past 18 months of disruption.
Even before that, the structural softness emerging in the sector through the rise of e-commerce had, arguably, posed the greatest challenge for sub-regional malls.
Faced with those headwinds, the gap in yields between small neighbourhood shopping centres and sub-regional malls has widened to its largest in a decade, driven by the uncertain prospects hanging over major tenants at the larger retail sites.
But that spread has also sparked renewed appeal, winning investment back to the sector. Last week, ASX-listed SCA Property Group snapped up Marketown in Newcastle in a $150.5 million transaction with AMP Capital. The deal was struck on an initial passing yield of 5.6 per cent and an implied fully let yield of 6.1 per cent.
Vicinity has progressively sold down a group of sub-regional malls in another fund it managed. The last, Mildura Central, was sold in April to IP Generation platform in an $81.1 million deal, with a yield above 9 per cent.
In April, CS Square, a sub-regional mall in outer Melbourne, was sold by Lendlease’s APPF platform to the De Lutis family for $136.5 million.
The Mount Pleasant offering comes amid increasing action in Queenland’s malls market, where QIC’s property arm is looking to offload its half-stake in Westfield Helensvale on the Gold Coast.
Preparations are also under way for a potentially full sell-down of one of the Gold Coast’s best-known malls, the $1.8 billion Pacific Fair, in what could become the biggest single deal yet in the retail real estate sector.
