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Midland Gate shopping centre in north-eastern growth corridor has been snapped up for $465 million by Melbourne-based fund manager Fawkner Property in partnership with Hong Kong-based alternative asset manager PAG.
The deal, struck on a core capitalisation rate of 6.5 per cent, is said to be the largest single regional asset transaction nationally since December 2019 and comes on the heels of a $100 million redevelopment of the property four years ago.
However, the sale fell short of the $650 million price tag expected for the centre when it went to the market in 2019 shortly after completion of the property’s expansion.
Managed by Vicinity Centres (ASX: VCX) on behalf of a mandate client, Midland Gate has a net lettable area of 68,600sqm and is anchored by the three major supermarkets along with Kmart, Big W, Target and an eight-screen Hoyts Cinema centre.
CBRE’s Simon Rooney, who negotiated the sale with Colliers’ Lachlan MacGillivray, says the deal highlights a shift back to the regional shopping centre market by investors.
“The value proposition for regional shopping centres is clearly compelling for investors, given the superior returns on offer compared to most alternative commercial property asset classes, where asset pricing levels generally remain at historic highs,” Rooney says.
“As retail fundamentals continue to reset for high quality assets and move into a clear growth phase, domestic and offshore investors are proactively re-engaging and seeking out top-end shopping centre investment opportunities such as Midland Gate, particularly being a 100 per cent interest with management rights.
“While 2023 transaction activity has been subdued to date, we expect Midland Gate to be the first of many significant transactions to close out the year and into 2024, with in excess of $1.2 billion in retail transactions currently under contract to exchange by the end of the year.”
Rooney says Midland Gate’s $100 million redevelopment and expansion had contributed to the solid trading fundamentals underpinning the sale. Midland Gate was marketed with specialty sales of $11,140 per square metre and total moving annual turnover of $510 million.
However, the shopping centre also occupies a significant piece of real estate at Midland totalling 14.3ha, which adds to its appeal.
CBRE says the town centre location, its proximity to the Perth CBD and heavy rail infrastructure provides the new buyers with the potential to create a future mixed-use development strategy for the site.
The latest deal follows a raft of sales and acquisitions completed by Vicinity Centres within its portfolio of owned assets since June. The most recent is a $307 million deal for 49 per cent of Chatswood Chase Sydney that has given Vicinity full ownership of the centre.
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