Scentre’s bargain-hunting lands it $308m stake in Adelaide mall
Shopping centre giant Scentre, backed by Barrenjoey Private Capital, has bought the remaining stake in Adelaide’s second-largest mall, Westfield Tea Tree Plaza, for $308 million, a price that represents a 12 per cent discount to the book value at which Scentre holds the other half it already owns.
The deal price is $42 million lower than the $349.5 million at which Scentre’s existing half was valued in December. It is also a chunky $102 million or 25 per cent less than the peak value of $410 million six years ago. The latest pricing for a major mall deal will send a strong signal on valuations in a market where an estimated $2 billion of assets are waiting in the wings to be traded.
The deal also represents a fresh move into funds management for Westfield mall owner Scentre, which will set up a jointly managed vehicle with investment bank Barrenjoey, tapping demand from private investors. Scentre exercised its preemptive right to strike the deal – brokered by CBRE’s Simon Rooney – effectively scuttling a mooted purchase at a similar price by investment platform IPG Generation.
“The opportunity was oversubscribed, reflecting the strong demand from private investors to invest directly into one of our Westfield destinations,” Scentre chief executive Elliott Rusanow said.
“The group has retained its 50 per cent interest and will continue to drive the strong operating performance of the centre.”
The half stake was sold off by ASX-listed Dexus, out of a retail property fund it manages after taking it over from AMP Capital.
The Tea Tree deal is understood to have been struck on a capitalisation rate, or cap rate, of about 7.3 per cent, another key pricing benchmark for the sector. The book value cap rate for the other half was 6.25 per cent in December, falling from the sharper 5.5 per cent four years at peak value in 2018.
These metrics will also be eagerly digested by a market working through a reset in values, spurred by higher rates and cost-of-living pressures. Big deals are beginning to stack up – Vicinity Centres recently struck a deal with the Future Fund to acquire its 50 per cent interest in Lakeside Joondalup in Western Australia.
“The opportunity to acquire a 50 per cent stake in a dominant and strong performing regional shopping centre in Adelaide’s affluent north-eastern suburbs garnered both domestic and offshore investor interest,” CBRE’s Mr Rooney said of the Tea Tree transaction.
“Active, well-capitalised investors are opportunistically acquiring the best quality fortress malls, which are historically rarely traded and offer exceptional investment fundamentals.”
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