PAG Buying Perth Mall From CPPIB-Backed Fund After Price Slides 25%

Asian private equity powerhouse PAG has made its second opportunistic property purchase in Australia within less than two months with the pick-up of Perth mall for a figure said to be around a quarter less than what its owners were asking in 2019.

Having closed on $1.8 billion for its latest property fund in August, PAG, together with Melbourne-based partner Fawkner Group, has now agreed to buy the Midland Gate shopping centre in the capital of Western Australia for less than the sellers’ A$500 million ($323 million) asking price, according to sources familiar with the transaction who spoke with Mingtiandi. An account in The Australian priced the deal at A$465 million.

The sale concludes a series of marketing exercises over the past few years by the mall’s owners, which include a Vicinity Centres partnership backed by Canada’s CPPIB and Australia’s Future Fund sovereign vehicle holding a 50 percent stake and a pension fund managed by Commonwealth Bank Group which has the remaining half.

Melbourne-based Vicinity Centres and its predecessors have been managing the 1980 vintage mall for the past twenty years, according to local press reports, with the eight-year CPPIB-backed partnership said to have matured several years ago. In 2019 Midland Gate’s owners had put the property on the market for A$650 million, or nearly 25 percent above the asking price in the latest marketing effort.

Sliding in the Suburbs

PAG’s Perth prize occupies a 14.4 hectare (35.6 acre) site in Midland, which is 45 minutes’ drive northeast of central Perth. The mall measures 68,600 square metres (738,000 square feet) of gross lettable area and has 3,059 parking spots to fit its suburban style.

The managers had completed an A$100 million refurbishment and extension of the property two years ago with the mall currently home to around 197 tenants, including Aldi, Coles, Kmart, Target and Woolworths.

CBRE’s Simon Rooney and Colliers’ Lachlan MacGillivray represented the owners in the sale of what since 2018 has been the sole remaining asset in the Vicinity partnership, with the mall offered together with management rights.

This latest sale effort lasted around a year and a half with reports in May of last year indicating that local fund manager Elanor Investors Group was in advanced talks to acquire Midland Gate for A$530 million. However, those discussions ultimately failed to produce a sale. At that A$530 million price the mall was said to be generating a circa 6 percent yield.

Sources with PAG, CPPIB, Colliers and CBRE declined to comment while Mingtiandi has yet to receive responses from other parties to the transaction.

Australian property markets have faced some of the toughest conditions in Asia Pacific this year with sales of income-earning property assets falling 65 percent in the first six months of 2023 to $6.8 billion, according to MSCI.

Bargain Hunting

With deal volumes dragging Down Under, Hong Kong and Tokyo-based PAG has gone on the offensive in Australia, having picked up an office tower in Sydney for A$393.1 million in a deal which closed last month.

PAG’s purchase of 44 Market Street from fund manager Dexus was completed at a 17 percent discount to the asset’s book valuation at the end of last year, according to the Aussie firm, with the property trading at a cap rate of 6.6 percent, according to industry sources who spoke with Mingtiandi.

Also in August, PAG’s private equity division acquired KKR’s controlling interest in pub and restaurant operator the Australian Venue Co for A$1.4 billion, with the deal bringing with it 210 retail locations.

A year ago PAG bought out Australian food processing firms Patties Foods and Vesco Foods in a deal valued at A$550 million.