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News release

SYDNEY

Federation Centres announces its third major joint venture transaction in under 12 months

$602 million co-ownership transaction with Challenger


AUSTRALIA, 5 JUNE 2013 – Acting on behalf of Federation Centres (formerly Centro Retail Australia), Simon Rooney of Jones Lang LaSalle has negotiated $602 million of half shares in six retail assets to Challenger. The overall transaction value equates to a passing yield of 7.42%.

Federation Centres has announced that it has entered into conditional agreements with various funds managed by Challenger.

Australian Head of Retail Investments at Jones Lang LaSalle, Simon Rooney said, “The transaction is ideal for Challenger as it allows them to enter into a partnership and gain immediate exposure to a portfolio of retail assets of significant scale that is diversified across a range of states and shopping centre formats.

“While these type of joint venture transactions are the overriding theme in the Australian market, it is part of a broader trend in global real estate capital markets and we are seeing the partnering approach adopted all over the world,” said Mr Rooney.

This latest announcement by Federation Centres follows GPT’s sale of a half share in Erina Fair for $397.1 million in May and precedes a number of major transactions to be completed in the near term. As a result, total retail transaction volumes are expected to be strong in 2013 with approximately $3.0 billion being recorded year to date, and follows a record year for transaction activity in 2012 ($6.3 billion).

Mr Rooney said, “Sovereign wealth funds and pension funds have been major participants in capital partnerships around the globe and are a deep source of liquidity. Demand from these large offshore investors seeking passive investments in core quality Australian retail assets has been the key driver behind many of these large transactions.
 
“Management expertise is particularly important in the retail sector but finding passive investors of the right cultural fit is also very important to the success of these partnership deals.”
 
Following $3.4 billion of part share retail transactions in the 2012 calendar year, a further $2.3 billion of part shares have already been completed in 2013 year to date.
 
Federation Centres has been the largest user of the capital partnership approach in the retail sector to date in Australia. This transaction represents Federation’s third major joint venture in less than 12 months, following the sale of a half share in a portfolio to Perron for $690.4 million and a half share in a portfolio to ISPT for $371.4 million.
 
Across the three major joint ventures, Federation Centres has unlocked almost $1.7 billion for the purposes of repaying debt and funding development activities while retaining management and development rights over the assets.
 
“Until recently, achieving this significant scale in the retail investment market was relatively difficult but a series of opportunities have emerged over the last 18 months and have boosted transaction volumes to record levels,” said Mr Rooney.
 
Assets in the sale portfolio to Challenger include:
• Roselands regional shopping centre (NSW)
• Bankstown regional shopping centre (NSW)
• Karratha convenience centre (WA)
• Sunshine convenience centre (VIC)
• Toormina convenience centre (NSW)
• Lennox  convenience centre (NSW)