Vicinity Centres buys two Perth shopping centres for $319 million

Vicinity Centres has announced its acquisition of two Perth metropolitan shopping centres, The Shops at Ellenbrook (Ellenbrook) and Livingston Marketplace, for a total of $319 million including costs.

They were bought from the Insurance Commission of Western Australia (ICWA) in a deal expected to be completed by early 2016.

“Both centres are in trade areas characterised by strong population and retail expenditure growth over the medium to long term, and have high specialty sales productivity and low occupancy costs," said Angus McNaughton, CEO and Managing Director of Vicinity Centres.

“Both assets also have development potential which will strengthen their positioning in their catchments over time. This is particularly the case at The Shops at Ellenbrook which includes 6.5 hectares of adjoining land acquired as part of the transaction.”

The purchases are being funded through debt, increasing the group’s gearing by about 150 basis points, within Vicinity’s target gearing range of 25%-35%.

Ellenbrook is a sub-regional shopping centre with a gross lettable area (GLA) of 32,400 square metres, about 30 kilometres from Perth’s CBD.

It is the main retail centre in a catchment forecast to experience a population growth of 4.7% and retail spending growth of 7.3% on an annualised basis over the next 10 years.

Ellenbrook is anchored by Woolworths and Coles supermarkets and a Big W discount department store (DDS). The centre has 75 specialty stores generating sales of $8,500 per square metre (psm) and have below-market specialty occupancy costs of 10.7%.

With a total site area of over 19 hectares, there is scope to add a second DDS and more specialty stores. 

Livingston Marketplace is a sub-regional shopping centre with a GLA of 15,500 square metres located in the southern Perth suburb of Canning Vale, 15 kilometres from the Perth CBD.

It sits in a catchment forecast to experience 2.6% population growth and 5.5% retail spending growth on an annualised basis over the next 10 years.

The centre has a Woolworths supermarket, a Big W DDS, and 36 specialty stores which generate specialty sales of $9,900 psm and have below market specialty occupancy costs of 9.7%.

Ellenbrook has been purchased for $220 million ($231.6 million inclusive of acquisition costs), which includes $20 million for the additional land surrounding the asset. The centre has been acquired on a cap rate of 5.75%.

Livingston Marketplace was bought for $83 million ($87.4 million inclusive of acquisition costs) on a cap rate of 6%.

Due to the rental growth potential, internal rates of return in excess of 9% for both centres are expected to be achieved.