Larry Schlesinger | 20 January 2013

Challenger acquires Centro Surfers Paradise Mall for $162.5 million

In what could signal a better year for retail property on the Gold Coast, diversified financial services group Challenger has bought the Centro Surfers Paradise Mall for $162.5 million.

The sale price is 1.6% above the June 30 2012 book value and follows a number of unsuccessful sales campaigns dating back to April 2010.

Challenger has acquired the centre alongside institutional investors having previously been a lender to the Centro-managed investor syndicate MCS 11, which held the asset.

The centre had attracted the interest of billionaires John Van Lieshout and John Gandel.

The sale was negotiated by retail specialist Simon Rooney of Jones Lang LaSalle, who said “a range of investors are now targeting quality retail assets with strong growth outlooks.

 Rooney says investors are "particularly attracted to Queensland’s positive economic growth forecast, high rate of population growth and strong international tourism sector, which will support a recovery in the Gold Coast retail market"

Centro Surfers Paradise is the dominant retail complex in Surfers Paradise occupying some 2.6 hectares on Cavill Avenue with more than 100m of frontage to the Esplanade overlooking the main Surfers Paradise beach.

The mall was first listed for sale in April 2010, but failed to achieve what Centro considered a reasonable price “in excess of $150 million”.

It was remarketed for sale in November 2011 but Centro could not negotiate a sale despite receiving a number of offers.

Centro purchased the mall for $88 million in 2006 on a yield of 10% with Woolworths as the anchor tenant along with 112 speciality tenants and over 21,000 square metres of gross lettable space.

Investors are forecast to receive a final syndicate net asset backing (NAB) of $1.63 for every $1.00 of original equity invested.

Centro Retail Australia will continue to manage the centre, which according to the Australian Financial Review has “substantial development upside”.

Centro Retail Australia is the restructured entity that emerged after Centro ran into deep financial trouble on the back of the GFC.

Subject to shareholder approval later this month, it will change its name to Federation Centres.

Centro Retail Australia owns 41 shopping centres and has assets worth $6.6 billion

It also manages a further 43 shopping centres on behalf of unlisted property syndicates.

 


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