Stake in Adelaide Shopping Centre Fetches $380m

Retail heavyweight Scentre Group has partnered up with an investment bank to take a half-stake in a major shopping centre in Adelaide’s north-east for $380 million.

The deal to acquire 50 per cent of the Westfield Tea Tree Plaza also includes the Tea Tree Plus next door at Modbury, about 15km from the SA capital’s CBD.

Scentre and Barrenjoey Capital Partners have stepped into the Westfield Tea Tree transaction under a preemptive agreement, marking their first foray into funds management, according to CBRE, whose head of retail capital markets, Pacific, Simon Rooney, negotiated the deal on behalf of a Dexus-managed fund.

The acquisition comes just weeks after the announcement of Vicinity Centre’s agreement with the Future Fund to acquire its 50 per cent  interest in Lakeside Joondalup, Western Australia.

CBRE said more major retail transactions were expected in coming months.

The Tea Tree Plaza deal is South Australia’s largest regional shopping centre transaction since November, 2019 when Paragon REIT and MA Financial took a 50 per cent stake in Westfield Marion for $670 million from the Lendlease-managed Australian Prime Property Fund Retail.

“The opportunity to acquire a 50 per cent stake in a dominant and strong-performing regional shopping centre in Adelaide’s affluent north-eastern suburbs garnered both domestic and offshore investor interest,” Rooney said.

“This interest was underpinned by the centre’s genuine value-add potential, robust investment fundamentals, South Australia’s stamp duty exception and attractive retail yield spread relative to Sydney and Melbourne.

 “Active, well capitalised investors are opportunistically acquiring the best-quality fortress malls, which are historically rarely traded and offer exceptional investment fundamentals.”

Rooney said the window of opportunity to invest in such retail assets was beginning to close, with “more investors looking to come back into the sector as interest rate volatility stabilises given the compelling returns on offer”.

▲ Tea Tree Plaza is about 15km north-east of the Adelaide CBD and among the biggest retail centres in SA.

Tea Tree Plaza has a total gross lettable area of 101,052sq m and is anchored by Myer, Big W, Kmart, Target and Harris Scarfe alongside a triple supermarket offering in Coles, Woolworths and Aldi, nine mini-majors and about 201 specialty stores.

The centre also includes a popular dining and entertainment precinct, offering 10 restaurants and a Hoyts cinema complex, forming part of the most recent redevelopment of the centre completed in 2018.

An additional $40 million in upgrade works are to be completed this year.

The centre, on a 22.4ha site, is managed by Scentre Group and draws 10.8 million customers annually.

It’s current trade area population is more than 440,253 residents and that is forecast to reach 487,795 residents by 2041.

Scentre Group owns, and manages, a slew of Westfield centres in Australia and New Zealand.