Westfield Marion in Adelaide.
Private equity firm JY Group has stamped its authority on the big end of the mall market with the purchase of a 50 per cent stake in Westfield Marion in Adelaide for $670m.
Westfield Marion is the city’s largest and only super regional shopping centre and the top end of the market has emerged as the most active as investors bet there will be a space squeeze as retailers fight for space.
The situation is a turnaround from a few years ago when malls were slammed by department stores seeking to cut back space, with many now replacing them with higher value retailers.
The purchase was finalised after the interest in the shopping centre was sold by Singapore-based private investment group Cuscaden Peak and the mall’s co-owner the Scentre Group did not exercise its rights to acquire the stake.
Westfield Marion in Adelaide.
The heat in the top end of the shopping centre industry is defying low consumer confidence with private investors leading the way in striking deals. The price was above the $645m which Scentre, operator of the local Westfield empire, held its interest.
The purchase increased JY Group’s mall holdings to close to $5bn and strengthens its ties with Scentre, with the pair also owning Westfield Whitford City in Perth.
Private groups have emerged as the largest mall buyers in this part of the cycle. Others including Fawkner Property, Haben and MA Financial have also been active.
The deal is one of the largest retail property transactions in recent years, and is another vote of confidence in the Australian retail investment sector as superannuation funds are also back buying.
CBRE’s Simon Rooney and JLL’s Nick Willis and Sam Hatcher handled the sale for Singapore’s Cuscaden Peak. It had picked up the interest via a 2022 takeover of Singaporean company SPH REIT. That fund had bought the interest from a Lendlease-run trust in 2019, also for $670m, with the value falling in the pandemic and then recovering.
The latest trade showed a capitalisation rate of about 6 per cent. Analysts say the asset has improved significantly since 2019, even though pricing remained static, which shows there is still value on offer in the sector.
The acquisition has elevated JY Group’s total retail purchases to $4.2bn since 2021 as it has bought into the recovery of retail property. The Westfield Marion buy follows its recent acquisition of a 50 per cent interest in Bankstown Central and other deals alongside Vicinity Centres.
Mr Rooney, noted the strong interest the asset garnered. “The sale process generated a significant level of both domestic and offshore engagement from a wide range of capital sources, including several institutional investors,” he said. “Fortress assets of the calibre of Westfield Marion remain highly sought-after, in this case underpinned by exceptional centre performance, the ability to partner with Scentre, Adelaide’s compelling yield spread relative to Sydney and Melbourne, and South Australia’s favourable tax structure,” Mr Rooney added.
Mr Willis said the sector was in favour. “Super regional shopping centres represent one of Australia’s most exclusive commercial real estate asset classes, with only 20 centres nationwide controlled by 12 owner managers. The opportunity to acquire an ownership stake in the super-regional sub-sector is rarely afforded to the public market,” he said.
“These assets are tightly guarded – they exhibit fortress-like fundamentals that are virtually impossible to replicate. The sale of Westfield Marion presented a rare opportunity to enter this sub-sector and secure a stake in one of Australia’s premier performing shopping centres,” he said.
The centre in Adelaide’s southwest is on a substantial 22.8ha freehold site. The 138,000sq m complex is anchored by David Jones, Myer, Woolworths, Coles, Aldi, Kmart, Big W, Target, Harris Scarfe, Event Cinemas, Bunnings Warehouse and Dan Murphy’s.
Westfield Marion is underpinned by robust annual retail sales of more than $1bn and has a specialty productivity rate of greater than $14,000 per sq m.