In an attempt to capitalise on the booming luxury retail market, ASX-listed shopping mall landlord Vicinity Centres (ASX: VCX) has acquired the remaining 49% interest of Chatswood Chase Sydney for $307m.

Those playing along at home may recall that this transaction represents a sizable 45% discount to the price this stake was traded for six years ago to Singaporean sovereign wealth giant GIC.

The purchase price represents a 6.5% discount to the value Vicinity ascribed to a 51% stake in the iconic Chatswood Chase retail asset earlier this year.

While this discount is consistent with those recently experienced across the retail property sector, the recent narrowing suggests corrections may be close to bottom.

$620m overhaul

Despite the risks of rising interest rates continuing to dent consumer confidence, Vicinity has plans to consummate its full control of Chatswood Chase with a $620m makeover.

Luxury inclusions are expected to include a rooftop “office village” and more lower-ground dining and fresh food court offerings.

To put Vicinity’s confidence over Chatwood Chase in context, MSCI figures reveal deal-making at its lowest ebb for a third quarter in more than a decade, down 64% on the same period last year.

Earmarked for next March, upgrades are expected to emulate the destination shopping and mixed-use development at Melbourne’s Chadstone Shopping Centre, which Vicinity co-owns with billionaire John Gandel.

Pre-leasing underway

Vicinity CEO Peter Huddle advised the market today that redevelopment plans represented one of the most transformational projects to be undertaken in Australian retail property, especially in light of an expected shortage of stock.

Huddle expects the centre to be worth $1.5bn when redevelopment plans are finished and generate a development profit of more than $200m.

Huddle also notes pre-leasing is already in tow.

He believes premium retail assets such as Chatswood Chase are a key pillar of the company’s strategy and an important enabler of resilient income growth through cycles.

“While we retain the right to nominate another purchaser prior to settlement, we are nonetheless pleased to take full control and expedite our board-approved redevelopment of the asset,” he said.

Out with the old

To fund the upgrade to its North Shore mall Vicinity recently offloaded:

  • The Roxburgh Village in Victoria to an Asian investor, JY Group, for $123m at an 8.8% premium to its June book value.
  • A 50% stake in the shopping centre at Broadmeadows Central in Melbourne for $134.5m at a 5.2% premium to December 2022 book value.
  • More than $40m worth of land.

Image: Artist’s impression of the revamped Chatswood Chase