Archive News

2 December 1999

GPT buys interests in Macarthur Square and Dandenong Plaza
General Property Trust (GPT) has acquired a half share in Macarthur Square shopping centre at Campbelltown in Sydney and the remaining one third share in Dandenong Plaza in Melbourne for a combined price of $184.7m,before acquisition costs.

GPT acquired these properties from MLC [Lifetime No 1 fund] which has gradually been re-allocating investments from direct property to property securities. This is a long-term strategy first outlined to investors in the 4th quarter 1998 MLC Investment Report.

The other 50% of Macarthur Square will continue to be owned by the Lend Lease managed Australian Prime Property Fund (APPF). GPT will now wholly own Dandenong Plaza.

The yield on the purchase price of the combined acquisitions after transaction costs is 7.4%.

The acquisitions are being funded by a $125 million 30 year CPI debt issue at an expected initial coupon of 5.9% and by cash and short term debt facilities. The initial CPI coupon will be set in the next 14 days. The coupon will increase quarterly at CPI.

Mr David Ross, Chief Executive of GPT Management Limited, said that with regional shopping centres in Australia now so tightly held he is delighted with the purchase of Macarthur Square, a regional shopping centre with particularly strong qualities.

He also said that the purchase of the balance of Dandenong Plaza will enable GPT Management to exclusively steer the repositioning of the centre.

GPT's Retail Portfolio Manager, Michael O'Brien said that the acquisitions are in line with the Trust's investment criteria for the retail portfolio which is to invest principally in regional shopping centre assets which have the ability to be the dominant retail facility in their trade areas.

Macarthur Square

Macarthur Square is a quality 60,000 square metre regional centre which is highly regarded in its marketplace.

The centre is anchored by a Harris Scarfe department store, a recently expanded Big W, Baby Target, Woolworths and Franklins Big Fresh as well as a 9-screen cinema complex and 151 specialty stores. There is parking for 2540 vehicles and direct access to Macarthur railway station.

The price of $127.7m for the half share (including surplus land) reflects an initial yield of 7.4% before transaction costs.

Mr O'Brien said, "The Campbelltown region has had strong population growth, and the population in the area is forecast to grow at 1.7% pa over the next 5 years compared to the national average of 1.2% pa.

Macarthur Square is the only regional shopping centre in its catchment area of more than 250,000 people and enjoys more than 20% market share A major extension was completed in 1996. The centre has further expansion potential on 7 hectares of adjoining land to the south of the centre.

The centre is virtually fully leased with below benchmark occupancy costs for specialty stores of 13.9%. The total centre sales are $281 million (up 6% on the previous year). This, when combined with strong specialty sales of $7,300 per square metre (up 9% on previous year), is a strong platform for rental growth," Mr O'Brien said.

Dandenong Plaza

Dandenong Plaza is a 60,000 sqm regional shopping centre located in the outer south eastern suburbs of Melbourne. The centre is anchored by a Myer department store, Target and K Mart discount department stores, Safeway and Coles supermarkets and a 10 screen cinema complex.

The price for the one third interest is $57m reflecting an initial yield of 8.8% before transaction costs.

Mr O'Brien said, "The centre is showing solid growth with annual turnover to October 1999 of $224m and specialty sales of $5,550 per square metre, which is up 7% over the previous year. Specialty occupancy costs are currently sitting at 14.4%.

The centre's growth over the last year has been significantly better than the average for the GPT retail portfolio. This is largely attributable to consistent remixing of the specialty component to include quality tenants such as Electronics Boutique, Sunglass Hut, Angus and Robertson large format store with café and Colonial State Bank" said Mr O'Brien.

"The centre's recent sales growth, the strength of demand for space from prospective tenants and the very strong visitation - at 12 million visits per annum, the 3rd highest in the GPT portfolio - provide good opportunities for future rental growth.

Planning is advanced to continue remixing the centre to further strengthen the tenancy mix in order to increase spend per visit" said Mr O'Brien.

Mr O'Brien said GPT's $2.6 billion retail portfolio continues to experience strong overall sales growth with total centre sales per square metre up 3.3% and specialties up 4.6% in the 12 months to October 1999. Regional centre occupancy costs are now 14.1%, down from 14.3% in October 1998. This positions the portfolio well for rental growth.

Financing - CPI Debt

Mr David Ross, Chief Executive of GPT Management Limited, said that the development of the 30 year CPI debt facility is another example of GPT's strong treasury management. "A significant proportion of leases have rent reviews which are linked to CPI so the use of CPI-linked debt is an effective match to the underlying assets" he said.

Standard and Poor's applied the Trust's AA-long-term credit rating to this issue. GPT's gearing level is now approximately 17%, still well below the sector average of approximately 25% and GPT's average duration of debt increases to seven years.

media