reducing debt a big driver in sales of centres

Source: www.smh.com.au/business

Need to reduce debt a big driver in sales of shopping centres
Carolyn Cummins Commercial Property Editor
February 23, 2009

SHOPPING centres worth more than $1.4 billion were sold over the past year, with many of the sales made to ease debt concerns, as in the case of Centro Properties.

The number of deals last year was down 60 per cent on 2007.

The biggest was the purchase from Stockland by Westfield and Unisuper of the Karinyup centre in Western Australia for $152.5 million. This was followed by the Golden Grove centre in South Australia, bought by the private group Fitch from Colonial First State Property for $100 million.

In NSW the biggest deal was the acquisition of the Batemans Bay shopping centre for $67.06 million by the NSW Government Super Fund.

Last week City of Ryde Council approved a development application from AMP Capital Investors for a $300 million redevelopment of Macquarie Centre. The mall is managed by AMP Capital Shopping Centres, which will also manage the redevelopment. Macquarie Centre is co-owned by AMP Capital Investors and WestART Trust.

The redevelopment plans include the addition of a bigger David Jones department store, a new two-level mall linking the new David Jones with the existing Myer store, about 130 additional specialty shops and a further 1400 car spaces.

The centre will expand by about 31,800 square metres to 130,000 sq m, making it one of the country's 10 largest.

John Burdekin, national director and head of national retail valuations at Jones Lang LaSalle, said that superannuation funds were net purchasers throughout last year. However, they were by no means very active.

"The continued flow of funds into superannuation enabled them to buy assets. However, the falling value of the share market meant many were overweight in direct property, and most were reluctant to add more property to their portfolio."

He said it was expected that this year there would be increased sales activity dominated by the domestic private sector and the increasing emergence of overseas institutional investors.

"These investors are expected to be lured by the recent softening in values, the decline in the Australian dollar and official target interest rate, as well as the ability to acquire a significant platform of quality assets, an opportunity which has not existed in the traditionally tightly held Australian market."

The head of retail investments Australia for Jones Lang LaSalle, Simon Rooney, said: "Institutional investors who have competitively sought property on tight yields in previous years attempted to sell assets in order to reduce debt and correspondingly were reluctant to take on debt to fund acquisitions."

This resulted in local private investors accounting for 53 per cent of purchases. Institutional owners were the main sellers.


Ends.

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