In a year with heightened off-market activity and record low deal volume, the trophy sale of Eastgate Bondi Junction (Eastgate) was finalised in the final days of 2023, providing confidence throughout retail capital markets.
The purchaser, fund manager Charter Hall acquired the asset alongside an existing institutional mandate. Charter Hall has been one of the largest buyers of Bunnings Warehouses during 2019 – 2022, however the acquisition of Eastgate marks its first major shopping centre investment above $100 million since acquiring Rockdale Plaza in 2019 for $142 million.
JLL’s Nick Willis and Sam Hatcher, alongside Stonebridge’s Carl Molony, Philip Gartland and Justin Dowers handled the divestment of Eastgate on behalf of ISPT’s Core Fund that has held the asset for almost 30-years.
Willis said, “The opportunity to acquire assets of this scale and quality within the eastern suburbs of Sydney are extremely rare, which led to a highly competitive on-market campaign. We are seeing a major resurgence of local and offshore institutional capital for retail given the positive fundamentals and relative returns the sector is providing. The global engagement from core institutional capital in this shopping centre is a testament to this trend.”
Carl Molony said, “The covenant strength and income weighting toward major tenants at Eastgate – being Coles, ALDI, Kmart and Dan Murphy’s – drove high levels of interest amongst core buyers. Additionally, there was further opportunity to reposition larger tenants upon lease expiry and extract value for capital that wanted to underwrite the additional risk and upside. The varying opportunities with Eastgate allowed the asset to be pitched to various pools of capital leading to the competitive nature of the campaign.”
Eastgate is located less than five kilometres from Sydney CBD in one of Australia’s most affluent corridors. Within a two-kilometre radius are suburbs like Double Bay which was, according to the Australian Taxation Office, Australia’s wealthiest suburb from 2020 to 2021, and Point Piper which has a median house price above $10 million.
Hatcher said, “Rising construction and debt costs is leading to record low forecast floor space supply. For assets such as Eastgate that sit in one of Australia’s most tightly held and expensive land value locations, the ability to replicate an asset of this scale is near-impossible. This was a key factor for capital engagement during the campaign to drive total returns in their financial underwrites.”
Sub-regional shopping centres (assets typically between 20,000 – 50,000m2 in lettable area and/or anchored by at least one discount department store) are sought after for their flexibility in management and opportunity to reposition for further upside.
Sydney is one of the most tightly held sub-regional property markets throughout the nation, with on average less than two assets trading per annum. However, nationally the sub-regional sub sector accounted for about 40% of total retail transaction volumes throughout 2023, which is the highest proportion on record since 2010.
