Sentinel invests more than $700m in retail as it completes purchase of Caneland Central

December 8, 2022

Shopping Centre News

Sentinel Property Group has bolstered its $1 billion-plus commercial real estate portfolio in Northern Australia by completing the purchase of Caneland Central Shopping Centre in Mackay for $280 million from Lendlease’s Australian Prime Property Fund Retail (APPF Retail), taking its investment in retail centres during 2022 to more than $700 million.

Caneland Central is a dominant 65,964m2 regional shopping centre anchored by Myer, Coles, Woolworths, Target, Big W and a range of mini-majors and speciality tenants. The centre is the largest shopping centre in the region, servicing more than 175,000 people.

APPF Retail has owned and managed Caneland Central since 2001. It attracted a high level of interest from prospective buyers as it is the premier shopping and lifestyle destination in the Mackay region for the local community and tourists.

Anne MacSporran, Fund Manager, APPF Retail, said: “The centre has been a strong performer for APPF Retail due to its mix of retail, lifestyle and dining and core position at the heart of Mackay’s local community. Despite recent market volatility, the outlook for Australian retail remains positive, with sales remaining robust post the pandemic.”

Securing Caneland Central follows Sentinel earlier this year snapping up Darwin’s Casuarina Square shopping centre for $418 million in the syndicator’s biggest deal since it was established in 2010. Both sales were brokered by JLL’s Retail Investments Team, Nick Willis and Sam Hatcher.

Hatcher said, “Opportunities to acquire a 100% stake in major Regional Shopping Centres seldom come to market. Caneland Central is the only 100% interest Regional Shopping Centre to have sold in 2022, and in the past 10 years, only three of the 38 Regional Shopping Centre assets to have sold in Australia have been for a 100% interest with management rights.”
Willis added, “This transaction is a positive endorsement for Australia’s retail investment market. It represents the second shopping centre trade above $250m in 2022, (excluding large format retail); and the largest shopping centre to have been formally marketed and sold this year.

“The value proposition for major retail assets is compelling despite higher debt costs, because initial yields are attractive, and valuations were reset in 2020. In this instance, the sale of Caneland Central was originally agreed in April 2022, prior to the RBA’s monetary policy tightening, and was concluded in November 2022 following a 275-basis point increase to the cash rate,” said Willis.

The Caneland Central purchase price resulted in a passing yield of 7.7%. The weighted average lease expiry (WALE) on the major tenants is 5.7 years, while the centre has a Moving Annual Turnover (MAT) of approximately $393 million, representing a growth of 22.5% since 2017.

This year, Sentinel has spent more than $800 million on new assets, while staff numbers have soared to more than 100 in response to the business growth.

Sentinel CEO Warren Ebert said: “Like Casuarina Square, Caneland Central completely dominates its market. Every man, woman and child in Mackay comes to Caneland four times a month. You could never duplicate this centre and you also cannot find another 14ha site like this in the city, let alone even close to the city.”

Caneland Central first opened in 1979 and has since undergone significant redevelopments including a $230 million expansion in 2011, which introduced a new food court and dining precinct, as well as the Myer department store.

Sentinel has plans to carry out immediate improvements to the centre, including a renewable energy upgrade through the installation of a roof-mounted solar system, which the Group has also provided at its DFO retail complex in Cairns. A new moving walkway is also being installed in the centre.

Ebert said major national and international tenants at Casuarina Square had already inquired about leasing space at Caneland Central.

“Caneland Central dominates the Mackay CBD and is the central focal point for retail spending and leisure for the wider region which spans 386km north to Townsville and 336km south to Rockhampton,” Ebert said.
“The centre is strategically located at the fringe of the CBD, and it is easily accessed, being located 500m off the Bruce Highway and just 3km north of Mackay Airport, offering an exposure to more than 33,000 cars daily.

“The trade area population of the centre is around 154,110 persons which is projected to grow to around 183,410 persons by 2036. Bernard Salt, one of Australia’s leading social commentators, recently forecast Mackay to be in the Top 20 sized cities in Australia by 2054.”

JLL’s Head of Research – Capital Markets, Andrew Quillfeldt said, “Retail spending and shopping centre fundamentals have performed above expectations in 2022 given the strength of the consumer from high levels of household savings, solid labour market conditions and wage growth. The combination of revenue growth for many retailers and rebasing of rents has helped restore occupancy cost ratios to more sustainable levels.

“While capital has been cautious towards assets of scale, across all sectors, we anticipate there will be a rebound in investment demand as we approach the peak in the interest rates cycle in 2023 and there is more clarity about the macro-outlook and future funding costs,” said Quillfeldt.

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