M&G Cashes in Sub-Regional Shopping Centre for $225m

The Casey Central town centre has been sold for $225 million, the biggest sub-regional shopping centre sale in Victoria in five years.

Haben Property Fund with joint venture partner The JY Group picked up the triple supermarket and discount department store town centre in Melbourne’s south-east growth corridor.

The centre was sold by British investment house M&G Investments, which acquired the mall in late 2016 for around $221 million from Westfield operator Scentre.

M&G undertook a $155-million redevelopment of the centre soon after acquiring the asset.

The centre is 40km from the CBD. The trade area population in the region has been forecast to grow at 2.1 per cent per annum over the next decade.

Haben managing director Ben Finger said the group was now focused on the long-term growth fundamentals of the asset and opportunities to build on the strong foundations that M&G put in place.

The centre’s tenancy mix is strongly oriented towards non-discretionary and service-based retailers, anchored by Coles, Woolworths, Aldi and a new Kmart discount department store occupying 54 per cent of the total space.

The transaction was brokered by Colliers’ Lachlan MacGillivray, who said the deal was struck on a yield of around 5.4 per cent.

“There is currently more than $2 billion in unsatisfied capital aggressively pursuing retail centres that offer these characteristics, as witnessed in recent market transactions including The Square Mirrabooka and CS Square,” MacGillivray said.

“Assets such as Casey Central rarely come to market [and it] is well equipped to serve the needs of the growing, family-based local community.”

The sale marks the largest sub-regional shopping centre transaction in Australia since 2019 and brings the total volume of sub-regional transactions for the year to more than $1.2 billion.

Earlier this year, the De Lutis family bought CS Square shopping centre on Melbourne’s north-western from Lendlease’s APPF Retail for $136.5 million on a passing yield of about 6.5 per cent.

Elanor Investors Group bought a Toowoomba mall for $145 million on a 7.9 per cent yield from Blackstone, which had acquired it for around $188 million five years earlier.

Elanor also acquired the Riverside Plaza shopping centre in Queanbeyan for $60 million from a wholesale fund run by Vicinity Centres.

SCA Property Group picked up a similar triple-supermarket neighbourhood centre, the Auburn Central shopping centre, in Sydney’s western suburbs for $129.5 million.

Perth’s Mirrabooka mall has also changed hands, purchased by syndicator Fawkner Property for $195 million on a passing yield of 6.97 per cent and a fully leased yield of about 7.25 per cent.

The great retail yield divide

According to research by the PAR Group, a research collective made up of Real Investment Analytics, the Data App and Y Research, the gap in yields between small neighbourhood shopping centres and sub-regional malls has widened to its largest in a decade.

Yields, which run inversely to value, have risen to 7.5 per cent for sub-regional malls, while for neighbourhood centres they have sharpened to around 6 per cent.

Data App director Rob Ellis said the larger determinant of the yield spread is the uncertainty of key tenants of sub regional centres—discount department stores and national fashion chain.

“Recent sales have highlighted a risk premium attached to sub regional centres, with a number of centres sold on 8 or 9 per cent yields,” Ellis said.

“Institutional owners have been active sellers, reducing their portfolio of these assets at a rate resembling a race to the door.

“While previously institutional owners fought over sub-regional centres particularly in non-metropolitan locales, the race now seems to be to off-load these centres to a diminishing pool of potential purchasers.”