Vicinity Centres have divested two of their non-core assets for a combined value of $195.5 million. Mt Ommaney Centre in Queensland sold for $94.5 million (Vicinity’s 25% interest), a 3.3% premium to book value, and Corio Central in Victoria sold for $101.0 million, a 3.8% discount to book value. The two centre sale reflected a 0.5% discount to their combined June 2019 book values.
CBRE’s Head of Retail Capital Markets, Simon Rooney negotiated the sales, with Corio Central acquired by IP Generation Pty Ltd and the quarter stake in Mt Ommaney Centre purchased by YFG Shopping Centres.
IP Generation is a property-based investment syndication which has completed more than $250 million of property transactions within the past 12 months. Rooney said Corio Central provided the group with a sub-regional centre securely anchored by Coles, Woolworths and Kmart on leases until at least 2025 – representing 44% of the gross lettable area (GLA).
Situated in an established northern Geelong suburb, approximately 68km south-west of the Melbourne CBD, the 31,052m2 centre benefits from a diverse tenant mix with major, chain and national retailers providing 87% of the GLA.
“Investors are targeting subregional centres like Corio Central, which have a strong non-discretionary tenant mix and provide a solid convenience centre offering,” Rooney said.
“In this instance, interest was underpinned by the significant investment occurring in Geelong, boosted by the recently announced Geelong City Deal – a 10-year partnership between the Federal and State Government which will provide the city with a $1.1 billion economic boost.”
Corio Central, VIC sold for $101 million to a property syndicate
The 25% stake in the Mt Ommaney Centre has been acquired by YFG Shopping Centres, a family business which controls 20 shopping centres in south-east Queensland, including Australia Fair on the Gold Coast and Brookside Shopping Centre in Brisbane’s north. The largest and most dominant shopping centre in the trade area, Mt Ommaney has a total GLA of 56,469m2, which is more than 20,000m2 larger than the next most significant retail centre.
“YFG was attracted to the unique opportunity to acquire a 25% interest in a major metropolitan Brisbane shopping centre with the potential to acquire management rights,” Rooney said.
“The centre is anchored by a triple supermarket offer of Coles, Woolworths and ALDI, together with a triple discount department store offer of Kmart, Big W and Target. It continues to benefit from the extensive population growth occurring in the region and provides significant future redevelopment opportunities,” Rooney continued.
This includes an approved development application for a 11,481m2 expansion, including the introduction of a state-of-the-art cinema, casual dining precinct and entertainment destination together with an improved bus interchange and increased parking.
Mt Ommaney Centre, QLD Vicinity’s 25% stake sold for $94.5 million
Grant Kelley, CEO and Managing Director Vicinity Centres, said: “We are pleased to have achieved solid pricing for these assets, following improved investor demand since we announced in August 2019 that we would not proceed with any further material divestments in the current environment. The sale of these non-core assets is in line with our strategy of focusing our portfolio on market-leading destinations. The transaction will further strengthen our balance sheet, with around a 90 basis point reduction in gearing, with the proceeds assumed to repay debt in the short term.”
Kelley added, “Over the medium term, we expect to drive additional value for security holders through investing the sale proceeds into accretive developments of our strongly performing centres, acquiring destination assets aligned with our strategy, or by acquiring Vicinity securities at accretive pricing. Today’s announcement is the continuation of strategic portfolio refinement, which has seen Vicinity divest interests in 37 non-core assets for $3.3 billion at a combined 0.7% premium to book value. These proceeds have been used to create additional value for our security holders through $1.1 billion of acquisitions, up 12.3% in value since acquisition; $0.5 billion of securities buy-back at an 11.1% discount to June 2019 NTA*; and $1.0 billion of developments which have delivered a 12.5% uplift on completion.”
While retail transaction volumes have decreased in 2019, Rooney said we are now seeing clear signs of more positive investor sentiment and heightened enquiry levels for retail assets.
“There is general acknowledgement that the retail sector has been over-sold, and that stabilised, better quality assets with an obvious growth and value add profile represent an attractive value proposition compared to other sectors.”
Rooney added: “An increasing number of these strategic retail assets, that have traditionally been long term institutional holds, are now presenting themselves. The opportunity to acquire these core and core plus retail holdings, at either current or recalibrated values, is becoming very appealing as evidenced by current and soon to be announced transactions.”
The sale of Vicinity’s 25% interest in Mt Ommaney Centre, QLD to YFG Shopping Centres Pty Ltd (as trustee for the YFG Trust) is expected to settle later this month. The sale of Corio Central, VIC to IP Generation Pty Ltd is expected to settle mid to late next month.
*Net tangible assets per security.
