Centuria acquires c.$70m sub-regional shopping centre

Centuria acquires c.$70m sub-regional shopping centre¹
Halls Head Central, WA expands $3.2bn retail AUM

• Acquisition anchored by strong convenience outlets: Coles, ALDI, and Kmart and two mini majors.
• 19,373 sqm² Greater Perth asset attracts 2.4 m annual visitors³; 3.3-year WALE⁴, 100% occupancy⁵.
• Counter-cyclical opportunity, secured at c.40% below replacement cost⁶.
• Underpins single-asset wholesale fund; forecast 8.0% starting distribution yield⁷, 13.5% target IRR⁸.

Australian real estate funds manager, Centuria Capital Group (ASX: CNI or “Centuria”), has expanded its $3.2 billion retail assets under management with the c.$70 million acquisition¹ of Halls Head Central, WA.

The 19,373 sqm² sub-regional shopping centre is anchored by supermarkets, Coles and ALDI, as well as discount department store, Kmart. These retailers are complemented by two mini-majors, 50 speciality shops and two freestanding pad sites. In total, 64% of gross income is generated from non-discretionary tenants and the asset attracts 2.4 million customer visits annually³. The asset provides a 3.3-year WALE⁴ and 100% occupancy⁵.

The centre, located along Old Coast Road, sits on nine hectares and its low site coverage of 22% provides potential development or land banking opportunities across c.10,000 sqm of surplus land.

The counter-cyclical retail asset was secured at c.40% below its independently assessed replacement cost⁶.

Jason Huljich, Centuria Joint CEO, said, “Hall Head Central provides a compelling, counter-cyclical investment opportunity within WA’s second largest city, Mandurah. The centre benefits from a high proportion of non-discretionary retailers while presenting value-add opportunities through tenant remixing or potential redevelopment.

“WA remains a standout state for retail property. Greater Perth’s population has increased by 3.6% throughout the previous 12 months⁹, and when coupled with low forecast retail supply and vacancy, it provides compelling fundamentals for the retail sector.”

The acquisition will underpin a single-asset, closed-ended wholesale fund named Centuria Halls Head Central Fund.

Bruce McCully, Centuria Head of Retail, said, “Halls Head Central is now our third retail asset within the City of Mandurah. Centuria has deep market experience within the region, actively managing the Erskine Shopping Centre and Mandurah Greenfields Shopping Centre.

“With limited new supply of retail assets, due to construction supply pressures, coupled with a strong population growth, we believe tenant demand will continue to outstrip supply for well-maintained sub-regional shopping destinations across Western Australia.”

Halls Head Central provides customers with exceptional amenities including on-grade parking for 960 vehicles, an enclosed air-conditioned mall, Wi-Fi, modern toilet and parenting facilities, children’s playground and a generous alfresco dining precinct.

The Centuria Halls Head Central Fund will provide an initial five-year term and is expected to be offered to wholesale investors from Monday, 20 May 2024. It has forecast starting annual distribution⁷ of 8.0% paid monthly, and a target 13.5% IRR⁸. The Fund has a targeted equity raise of $41 million with investments starting from $100,000.

The asset’s high-profile position along Old Coast Road is the central arterial roadway connecting regional hubs, Rockingham and Bunbury. Its 247-metre street frontage is exposed to 40,500 vehicles passing the centre each day (14.7 million annually). Halls Head is positioned c.75km south of Perth’s CBD.

Settlement is anticipated in July 2024.

CBRE’s Simon Rooney and James Douglas were the appointed sales agents.

1. Centuria has entered into a Put and Call Agreement for the purchase of Halls Head Central which is subject to a condition precedent that must be completed prior to settlement. The transaction is expected to settle on, or around, July 2024.
2. Size by Gross Letting Area (GLA).
3. Across 12-month period to March 2024.
4. Weighted Average Lease Expiry (WALE) by gross income as at 30 June 2024.
5. Occupancy by income, supported by the vendor’s 12-month rental guarantee on vacant tenancies at settlement from July 2024.
6. Property Insurance Reinstatement Cost Assessment (excl. GST) provided by CBRE as at 23 April 2024.
7. Distribution will be paid if declared by Centuria Property Funds No.3 Limited and will be subject to the terms, assumptions and risks set out in the IM.
8. Modelled Target IRR applying assumptions including terminal cap rates for the property. The modelled target IRR is subject to due diligence and the modelled target return is not a forecast and is provided for the information of Financial advisers only. The modelled target IRR is net of fees, pre-tax and based on Centuria’s acquisition modelling but is highly contingent on the key future assumptions, which are not contracted or certain. No guarantee is made that the modelled target IRR, or any of the assumptions and variables used to calculate the IRR, will be achieved and the actual IRR may differ materially from the modelled IRR.
9. Source: Australian Bureau of Statistics, Regional population for the 2022-2023 financial year.