The Lendlease-managed Australian Prime Property Fund Retail (APPF Retail) has sold its 50% stake in Westfield Marion shopping centre, Adelaide. It has been acquired by a Moelis Australia managed investment vehicle, fully capitalised by SPH REIT out of Singapore for $670 million. The 136,851m2 (GLA) Westfield Marion is the largest and the only super regional shopping centre in South Australia and is ranked 13th in Australia in SCN’s ‘Big Guns’ 2019 (by total MAT).
The $670 million sale represents the largest single asset retail transaction in Australia this year, the largest retail transaction recorded in South Australia and is one of the largest globally for 2019 and demonstrates a growing confidence in the South Australian economy and retail sector.
CBRE Head of Retail Capital Markets – Pacific, Simon Rooney with Colliers Head of Retail Investment Services – Australia, Lachlan MacGillivray negotiated the $670 million sale on behalf of APPF Retail and manager Lendlease. Westfield Marion was attractive to buyers due to its location, dominance within its trade area and trading history. Scentre Group will retain ownership of the remaining 50% stake.
APPF Retail Fund Manager David McNamara said; “The divestment of APPF Retail’s interest in Westfield Marion represents a significant result for investors in the current market. The fund has a portfolio of high quality, dominant assets located in strong and growing trade areas and the fundamentals for Australian retail remain positive with a long-term stable economy, continued population growth and controlled planning. While the sector is evolving in response to a number of global thematics, the fund is well positioned to capitalise on emerging opportunities presented by these trends.”
Westfield Marion was attractive to buyers due to its location and dominance within its trade area
Susan Leng Mee Yin, CEO of SPH REIT Management noted that the acquisition deepened SPH REIT’s presence in the Australian market and followed its first asset acquisition of Figtree Grove Shopping Centre in December 2018.
“The acquisition will enhance the sustainability and resilience of SPH REIT’s returns to unitholders through the increased geographic diversity, larger freehold land tenure, and longer underlying leases with embedded rental growth potential. This transaction and our co-ownership with Scentre Group marks another significant milestone in expanding our presence in a country and sector with growth prospects. We are pleased with this opportunity to partner Scentre Group, the premier developer and operator of Westfield Shopping Centres in Australia, as well as to strengthen our existing relationship with Moelis Australia,” Leng said.
Chris Monaghan, Managing Director and Head of Real Estate Asset Management for Moelis Australia, added; “We look long and hard for investments for our clients and Marion Shopping Centre was an ideal fit for SPH REIT. Their criterion centres around best in class and Marion clearly is that.”
Monaghan noted that Scentre was best in class when it came to shopping centre management and development and both Moelis and SPH REIT were excited at the prospect of working with Scentre going forward.
“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. Marion is one of Australia’s strongest trading fortress malls, so we are pleased to have it as part of our client’s portfolios,” Monaghan said.
Westfield Marion is the largest and the only super regional shopping centre in South Australia
Strategically located just 10 kilometres south-west of the Adelaide CBD, Westfield Marion is the 11th largest shopping centre in Australia, reporting Moving Annual Turnover (MAT) of $846 million, 61% above its closest in-state competitor.
Rooney said; “Demand for core real estate in the Australian retail market remains consistent, primarily and increasingly so from major offshore investors. Having been historically priced out of the market by domestic funds, offshore investors are clearly attracted by the opportunity to acquire strategic interests in dominant, high-quality, “fortress-style” retail assets. These assets, offering best in class managers and attractive, low-volatility returns, are seldom offered to the market.”
MacGillivray added; “The fundamentals of Australian retail remain attractive from a global perspective, with population growth among the strongest of the OECD countries, low supply per capita and a stable economy, while a recovery in wage growth to drive discretionary spending.”
The Marion purchase demonstrates confidence in the South Australian retail market, boosted by significant investment in Adelaide, including a $90 billion investment in the defence sector, the recently completed $3.6 billion Adelaide BioMed City and tourism spend reaching $6.9 billion in the 12 months to September 2018.
South Australia’s only super-regional shopping centre, Westfield Marion
The sale represents a discount of 2.9% to APPF Retail’s 30 September 2019 book value of $690 million. The sale represents a significant milestone for the fund as it works through a process of providing liquidity for a number of its investors. The Fund is well positioned to implement a range of options to meet remaining requests.
