In a second major shopping centre sale this week, Stockland are moving to sell off the Jesmond Shopping Centre in Newcastle at a significant discount to book value as it works through the divestment of a number of its smaller malls.
Property syndicator Haben Property Fund is expected to acquire the Centre for about $118 million, a 10 per cent discount to its current book value of $130 million and reflecting a yield of around 8%.
The shopping centre is anchored by Woolworths, Aldi and Big W with 65 specialties, 4 kiosks & 2 pad sites covering a total GLA of 20,339 sqm. The Centre is currently 97.9% occupied with a fully leased net operating income of over $10.7m per annum.
The Centre currently generates over $157m of sales ($7,719/sqm) with a specialty occupancy cost of 16%.
The discount to book value on the sale may reflect the potential loss of Big W in years to come. Despite a Big W lease expiry in 2029, the Centre is not immune to the potential closure of the store which follows Woolworths decision to close up to one third of stores (ie 60) across the country. At present Woolworths are seeking to negotiate surrenders of leases with various Landlords as was the case with Fairfield, Auburn and Chullora earlier this month. As the Newcaslte region is home to 6 stores we expect 2 stores are likely to be on the chopping block.
Stocklands' sell off is part of its strategic re-weighting to logistics and industrial assets, where it hopes future income and capital growth will more than make up for the discount and trading costs to move out of the retail sector.
Over the past 2 years Stockland have sold $700m of shopping malls at Tooronga and Highlands in Victoria, Coloundra and Cleveland in Queensland and Bathurst, Wallsend and Corimal in NSW. Haben are well known to Stockland as they were also the purchaser of two of these assets, paying $103m for the Cleveland Shopping Centre in Brisbane and $81m for the Wallsend Shopping Centre in Newcastle. The weighted average cap rate of the sales has been 6.9%.
In February Stockland indicated it would sell a further $600m of shopping centre assets. The latest sales suggests there is at least $300m more to come, taking the total sales to over $1bn.