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News release


The Australian retail shopping centre investment market: First half of 2009

SYDNEY, 13 JULY 2009 - Approximately $930 million in shopping centres (above $5 million) changed hands across Australia in the first half of 2009. Most of these transactions were concentrated in the neighbourhood shopping centre sector, accounting for 46% of all transactions.
Total neighbourhood centre sales for the first half of 2009 totalled $424 million, with yields ranging between 7.28% and 9.84%. This represents an increase in transactional activity by 56% on the same period last year, when approximately $238 million worth of neighbourhood centres exchanged with yields ranging between 6.46% and 8.16%.
Simon Rooney, Australian Head of Retail Investments at Jones Lang LaSalle said, "The $10 million to $40 million pricing bracket remains the most active, as demonstrated by the marked increased in market activity. Demand for these assets has been underpinned by the counter cyclical private and syndicate investors, who accounted for 88% of the buyer profile for these neighbourhood shopping centre assets.
“This can be primarily attributed to the historically low cost of funds and the obvious softening in values for neighbourhood centres, which have ranged between 100 and 300 basis points since the peak in mid to late 2007, depending on the quality, location, income and growth profile. This has resulted in cash flow positive returns, which have not been achievable in recent years,” Mr Rooney said.
Institutional owners who have taken advantage of this latest surge in private and syndicator demand include ISPT, Centro, GPT, Brookfield Multiplex and Mirvac, with the announcement of further sales expected in the coming weeks.
Recent neighbourhood shopping centre sales which Jones Lang LaSalle has successfully negotiated in the last few months include Floreat Forum Shopping Centre, Alexandra Hills Shopping Centre, Centro Warringal, Welland Plaza, Lanyon Marketplace, Bracken Ridge Plaza and Shoreline Shopping Centre.
Further details on these neighbourhood shopping centre sales include:
Lanyon Marketplace:  Lanyon Marketplace comprises a strongly trading Woolworths supermarket, together with 18 specialty shops and three ATMs, providing a GLA of 5,459sqm (approx.), with parking for 301 cars (approx.).  Set on a site of 2.33ha (approx.), the Centre is located in the suburb of Conder, 20km (approx.) south of the Canberra CBD.
Floreat Forum:  Floreat Forum is a near new neighbourhood shopping centre securely anchored by Woolworths and Coles supermarkets, together with mini-major Best & Less, 76 specialty shops, 10 kiosks and 4 ATMs, plus Woolworths Petrol Plus, Fitness First and a tavern, providing a GLA of 18,977sqm  (approx.), with parking for 925 cars (approx.).   The Centre occupies a highly visible 42,328sqm (approx.) site in the Perth suburb of Floreat, Western Australia, approximately 6.5km west of the CBD. 
Alexandra Hills:  Alexandra Hills is a thriving neighbourhood centre securely anchored by a strongly trading Woolworths supermarket and Trade Secret, together with 37 specialty shops, eight office suites, a kiosk and seven ATMs, plus five external tenancies, providing a GLA of 12,344sqm (approx.), with at-grade parking for 650 cars (approx.). The Centre occupies a 40,064sqm (approx.) site in the Brisbane suburb of Alexandra Hills, 2km (approx.) east of Capalaba.
Centro Warringal:  Centro Warringal is anchored by Coles and ALDI supermarkets and Dimmeys, together with 33 specialties, 7 kiosks, an office suite and 3 ATMs, plus a car wash, providing a 11,772sqm (approx.) of GLA, with parking for 569 cars (approx.). The Centre occupies a 16,687sqm (approx.) site in the Victorian suburb of Heidelberg, approximately 15km north-east of the Melbourne CBD. 
Welland Plaza:  Welland Plaza is a modern neighbourhood shopping centre anchored by a strong trading Coles Supermarket and Dan Murphy's liquor store, both paying percentage rent, together with 25 specialty tenancies, two kiosks, four ATM’s and a KFC pad site, providing a GLA of 8,912sqm (approx.), with parking for 436 cars (approx.) The Centre is located on a 2.98ha (approx.) site, 6km (approx.) north-west of Adelaide CBD. 
Shoreline Shopping Centre:  Shoreline Shopping Centre is a fully enclosed neighbourhood shopping centre anchored by a strongly performing Woolworths supermarket, together with a mini major, 18 specialty tenancies and 3 ATM’s, providing 5,987sqm (approx.) of GLA, with parking for 3154 cars (approx.).  The Centre is located on a 1.97ha (approx.) site in the Tasmanian suburb of Howrath, 11km (approx.) east of the Hobart CBD.
Bracken Ridge Plaza: Bracken Ridge Plaza is an established neighbourhood shopping centre anchored by Coles supermarket, together with 26 specialty shops, a kiosk and seven ATMs, providing a GLA of 6,067sqm (approx.), with parking for 365 cars (approx.).  The Centre occupies a prominent 2.4ha (approx.) site in the metropolitan Brisbane suburb of Bracken Ridge, approximately 16km north of the CBD.
Jones Lang LaSalle has recently also commenced marketing The Well at Camberwell, Victoria, which will be a further test for the neighbourhood market.  
The Well at Camberwell: The Well at Camberwell is anchored by Coles supermarket, JB Hi-Fi and Gensis Fitness Club, together with 29 specialties, a kiosk and four ATMs, providing a GLA of 9,240sqm (approx.), with parking for 350 cars (approx.). The Centre is located in the affluent Melbourne suburb of Camberwell, 9km (approx.) east of the CBD.
Jones Lang LaSalle has also commenced marketing Firle Plaza, a dominant South Australian sub regional shopping centre.
Firle Plaza: Firle Plaza is a sub regional shopping centre, being anchored by a Kmart discount department store and Coles supermarket, together with 23 specialties and four ATMs, providing a GLA of 12,140sqm (approx.), with parking for 692 cars (approx.). The Centre is located on a 41,664sqm (approx.) site in the suburb of Firle, 6km (approx.) east of the Adelaide CBD.

Mr Rooney said looking forward, private equity and syndicate based investors are expected to continue to drive activity for neighbourhood centres in the next 12 months.
“From a pricing perspective, and as demonstrated by recent transactions, we have seen a general recalibration in values for prime neighbourhood shopping centres in the first half of 2009, particularly for centres with key investment fundamentals, including long anchor tenant lease terms with inbuilt growth, positive demographic characteristics, development and/or value add opportunities.
“This evident recalibration would seem to reflect a plateau in values at the prime end of the neighbourhood shopping centre market and could suggest that we may see in some cases, only limited further softening of between 25 to 50 basis points in the prime end of this sector over the next 12 months, reinforced by the increasing investment demand and heightened sale activity in this neighbourhood sector, ” Mr Rooney said.
The second and third tier market is expected to see further softening in the short to medium term.
Activity within the $40 million to $100 million price bracket was limited within the first half of 2009, with only two transactions occurring: Nambour Plaza, Queensland for $51.05 million and Ipswich City Square, Queensland for $45 million.
Strong buying opportunities over the next 12 months will be present within this sector of the market; although activity is expected to be limited by the ongoing difficulty in securing debt, increasing bank margins and raising new equity.
“The difficulty in securing debt and raising new equity will restrict the level of investment within the $40 million to $100 million price bracket over the next 12 months, creating strong buying opportunities for a select group of cashed up private investors, together with a number of private syndicates and domestic institutions who are currently in the process of establishing syndicate vehicles,” Mr Rooney said.
Although, there are three to four major sub regional shopping centre transactions currently under contract in this price bracket, which are expected to be shortly announced.
Activity above $100 million
The first half of 2009 witnessed two transactions above $100 million. Both of these transactions were negotiated by Simon Rooney of Jones Lang LaSalle, being Floreat Forum Shopping Centre, Western Australia for $100 million on behalf of GPT and Golden Grove Shopping Centre, South Australia for $100 million on behalf of Colonial First State Property.
“Despite prime CBD, regional and larger sub-regional assets maintaining positive performance metrics and high occupancy rates, activity in the $100 million plus pricing bracket has been limited due to the ongoing difficulty in securing senior debt. This has subsequently created the most attractive buying propositions within the retail sector and we are now seeing new institutional mandates both domestically and offshore, willing to capitalise on this opportunistic gap in the market.
“Whilst the difficulty in securing senior debt will continue to restrict transactional activity above $100 million, a number of current retail mandates from onshore and offshore institutional investors are expected to materialise over the next 12 months as once-in-a-cycle acquisition opportunities present themselves to these counter cyclical institutional investors,” Mr Rooney said.
The first big test of the regional market will be the upcoming off market sale process of ING Retail Property Fund Australia’s, Lakeside Joondalup Shopping Centre in Western Australia, which was recently valued at an estimated $490 million and is being conducted by Simon Rooney.
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