Federation Centres sells half-shares in four malls to ISPT for $371.4 million

In its first significant deal under the new name of Federation Centres, the former Centro business, has agreed to sell half-shares in four malls and a convenience centre to the Industry Superannuation Property Trust (ISPT), one of Australia’s biggest unlisted property trusts.

The four sub-regional shopping centres are Mandurah in WA, Cranbourne and Karingal in Victoria and Warriewood in NSW. The convenience centre is Halls Head also located in Mandurah, WA.

The transaction with ISPT represents a 2.9% premium to the June 30 2012 book value (pre-transaction costs) and average yield of 7.49%.

The signing of the co-ownership agreement with ISPT, follows the deal in May last year for the privately-owned Perron Group to pay a post-GFC record of $690.4 million to acquire a 50% share in a portfolio of three Centro flagship regional shopping centres.

The three shopping centres in this deal were the Colonnades in South Australia, The Glen in Victoria and the Galleria in Western Australia in a deal brokered by Simon Rooney, Australian head of retail investments at Jones Lang Lasalle.

Commenting on the latest deal, Federation Centres managing director and CEO, Steven Sewell said the transaction with ISPT is part of the transformation of the business under the new name.

“When combined with the previous Perron Group strategic alliance, on completion of this transaction with ISPT, Federation Centres will have undertaken co-ownership in eight centres with a gross value of $2.1 billion.

“With more than $1 billion in capital raised from these co-ownership arrangements, we will be well positioned to grow our business through redevelopment projects across our portfolio of quality Australian shopping centres and further acquisitions of syndicate properties.

Federation Centres will continue to manage the shopping centres to be held with ISPT.

ISPT has over $8 billion of property assets.

Subject to the satisfaction of conditions, the transaction is expected to be completed on or before 31 July 2013. Proceeds from the sale, net of transaction costs, will initially be applied to reducing debt facilities.

Daryl Browning, CEO of ISPT said he was looking forward to working with Federation Centres to “explore future development opportunities for the co-owned shopping centres to enhance returns for our investors”.