Boutique fund managers Centennial and Parkstone Funds Management have acquired Hinkler Central shopping centre, the largest retail centre in Bundaberg, for $107 million in a yield-driven acquisition that the partners say could lead to expansion of the asset.
The centre, described as one of Australia’s 10 best-performing retail centres of its class, has been acquired from QIC which paid $110 million for the property in 2015.
The deal is also the first of further acquisitions planned by the fund managers in a new strategic partnership.
While Centennial and Parkstone have not revealed the yield at which their acquisition was struck, QIC’s purchase from Mirvac Group (ASX: MGR) nearly nine years ago was secured on a reported yield of between 6.5 and 7 per cent.
The 21,000sqm shopping centre, anchored by Woolworths, Kmart and Coles, is located in Maryborough Street on the edge of Bundaberg’s CBD and is supported by 65 retail and dining outlets.
The South Australia-based Parkstone Funds Management, which has a portfolio of seven retail centres in regional NSW and South Australia, says the deal has been struck at 30 per cent below replacement cost following extensive due diligence by the joint-venture partners.
"The acquisition of the Hinkler Central shopping centre significantly bolsters our group’s exposure to sub-regional centres while further enhancing our portfolio’s overall quality and diversification,” says Parkstone’s managing director Tim Wilkin.
“We consider it an excellent yield and growth play because of the high barriers to entry in this market, being acquired approximately 30 per cent below replacement cost.
“There also exists further opportunity to enhance the centre in terms of development, which when combined with the ability to access positive rental reversion, should be well supported by the substantial government infrastructure spending currently in progress and planned for Bundaberg, aligning very well with the forecast investment horizon for this asset.”
Hinkler Central has been acquired with an occupancy rate of 99 per cent and with about 94 per cent of gross lettable area leased to national retailers.
“The centre’s metrics position Hinkler Central among the top 10 nationally in its class,” says Wilkin, with the that analysis based on the centre’s gross lettable area and moving annual turnover metrics.
“The resilience and attractiveness of sub-regional shopping centres adds a further level of optimism to our regional investment strategy.
“Centres of this quality serve as important community hubs and have demonstrated proven resilience through some challenging times in recent years.”
The Hinkler Central acquisition was secured in an off-market deal that Sydney-based Centennial, which has $2.1 billion in funds under management, says aligns with its ‘strategic vision to acquire off-market, high-performing, dominant land-rich regional centres at favourable yields and well below replacement cost’.
“We are delighted to be participating in the acquisition of such a high-quality investment that offers a very attractive distribution yield while comprising quite defensive characteristics,” says Centennial’s executive director Paul Ford.
Centennial CEO Adrian Taylor notes that the Bundaberg acquisition heralds the beginning of a strategic retail partnership that brings together Centennial’s extensive funds management experience and Parkstone's expertise in the retail property sector.
“The acquisition underlines Parkstone's and Centennial's proactive approach to seizing off-market opportunities with similar characteristics in the market,” says Taylor.
“This is the first of what we anticipate will be a broader partnership that will position us as a major player at scale in this space.”
The sale was handled by Sam Hatcher and Jacob Swan of JLL.
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