Federation Centres sells half stakes in six regional malls to Challenger for $602 million

Federation Centres  has entered into a conditional agreement to sell six regional shopping malls to fund manager Challenger for $602 million.

These assets are owned by Federation Centres and certain former Centro syndicates, with a gross value of $1.2 billion.

Federation Centres is the new restructured entity that emerged from the debt-laden Centro Retail Australia business in February.

The portfolio of assets consists of the regional shopping centres at Bankstown and Roselands in New South Wales, and the convenience centres at Toormina and Lennox, in New South Wales, Sunshine in Victoria and Karratha in Western Australia.

The sale was negotiated by Simon Rooney of Jones Lang LaSalle, who successfully negotiated the sale of GPTs sale of a half share in Erina Fair for $397.1 million in May and precedes a number of major transactions to be completed in the near term.

"As a result, total retail transaction volumes are expected to be strong in 2013 with approximately $3.0 billion being recorded year to date, and follows a record year for transaction activity in 2012 ($6.3 billion)," says Rooney. 

“Sovereign wealth funds and pension funds have been major participants in capital partnerships around the globe and are a deep source of liquidity. Demand from these large offshore investors seeking passive investments in core quality Australian retail assets has been the key driver behind many of these large transactions," he adds.

The overall Federation Centres- Challenger transaction equates to a passing yield of 7.42%.

FDC will remain as the manager of these centres and will be responsible for managing their redevelopment program.

Federation Centres has an established relationship with Challenger selling its syndicate-owned Surfers Paradise Centre in Queensland to Challenger for $162.5 million in January.

“On completion, this transaction continues to deliver on our key objective of introducing select and like-minded strategic parties on a range of larger centres," says Federation Centres managing director and chief executive officer, Steven Sewell

"This facilitates reduced funding costs and supports the recently awarded Standard & Poor’s A- investment grade credit rating for Federation Centre's senior secured bank debt.

"The co-ownership strategy provides Federation Centres with the liquidity and balance sheet flexibility for the future funding of our redevelopment and enhancement program of our portfolio of quality Australian shopping centres," he says.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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