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McGrathNichol - To sell a Sub-Regional Shopping Centre

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The Challenge

Upon first view the property and completing our initial due diligence we identified the centre as underperforming for the following reasons:

  • The newly refurbished centre had no pedestrian flow
  • Majority of tenants had the same fitouts which suggested large incentives were provided by the original developer. Why would this be the case?
  • The speciality shops were too large and the common areas were to vast
  • No parking on the same level of the anchor tenants.
  • Our contacts within the companies of the major tenants indicated massive decline in sales in recent years.

The Solution

We were appointed on our proposal to offer it in the marketplace for reconfiguring or redeveloping the asset.
Once we were appointed a co -agent was appointed to cover the investment angle. (Just in case scenario).
This proved to be an issue with the marketing as it gave the market mixed messages about the asset and parties were offering money without qualifying the investment return.

In due course the investment return of the asset was negligible and by the time the sale was completed the centre was losing $1.5m per year.
A major issue for parties that wanted to acquire the property was that there was a massive negative cashflow and the banks were reluctant to fund any project for the site.

C&W identified the potential purchaser early in the appointment however, due to other parties placing offers in that they could not contractual exchange or then complete, made the task even more difficult.

The Results

Two years after the original appointment the asset was exchanged on the basis that the purchaser was given vacant possession. This was a difficult but not impossible task and with the assistance of the managing agent was completed within the appropriate time frame.

The length of time to transact the asset meant that the value/offers were being reduced the longer the asset was for sale.