Friday, June 14, 2024

Shopping centres take off with $100m in Sydney mall sales

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Centuria Capital has sold Pemulwuy Marketplace for $40m.

Active shopping centre buyers, private developer Revelop and the listed HMC Capital, have snapped up two Sydney assets for a combined total of $100m from a Centuria Capital-run fund.

The groups are both expanding their holdings of neighbourhood centres in Sydney and their purchases show values have risen in this sector despite interest rate hikes.

Revelop picked up Pemulwuy Marketplace for $40m and HMC’s listed retail fund, HomeCo Daily Needs REIT, forked out about $60m for West Ryde Marketplace.

Revelop director Charbel Hazzouri said the company had a significant history in the Pemulwuy estate since 2008 and in 2015 it bought the remainder of the undeveloped estate from Boral, allowing the formation and creation of many of the residential subdivisions and high density apartments.

The two centres were sold by Nick Willis and Sam Hatcher from JLL in two off-market deals. The agency said the sales showed the strong investor appetite for core Sydney assets amid a period of slow deal flow this year.

Mr Hatcher said investment supply had remained subdued in this half, which was driving increased bidding competition, particularly for core retail assets, as was seen in the sales process.

West Ryde Marketplace and Pemulwuy Marketplace, located 13km and 26km from the Sydney CBD respectively, are prominent neighbourhood centres both anchored by a Woolworths supermarket.

They have a strong focus on non-discretionary spending, are complemented by specialty stores and have longer-term development options.

Neighbourhood centres are still being chased due to their income security and long-term capital growth. While the metrics on West Ryde and Pemulwuy Marketplace have not been disclosed, they show an uplift from when they were bought.

They last traded in 2020 when Primewest – which was acquired by Centuria Capital – put them in its daily needs/neighbourhood retail property trust, which is backed by GIC. It bought them from the Charter Hall Retail REIT and joint venture partner Retail Partnership No. 1 for $91.5m.

JLL said yearly average transaction yield across all retail sub-sectors increased by about 70 basis points, from about 5.7 per cent to 6.4 per cent, between 2020 to 2023.

But the sale of West Ryde and Pemulwuy Marketplaces deviated from this trend with yields tightening. Over the past decade, comparable centres have transacted at an average passing yield of about 5.35 per cent.

JLL noted that in 2023, private investors were the majority buyer group for neighbourhood centres, acquiring 27 out of the 35 complexes, a notable 77 per cent market share.

Mr Willis said a “significant” weight of capital was looking to deploy across various retail sub-sectors, although the first quarter had been subdued.

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