The owner of the local Westfield empire, Scentre Group (ASX:SCG), has teamed up with investment bank Barrenjoey to buy a half stake in Adelaide's Westfield Tea Tree Plaza and a small adjoining centre for about $308 million. The deal marks a shift by the large mall owner, which has traditionally worked with big institutions to buy malls. By joining with the bank it is now tapping private capital that wants to directly own shopping centres, opening up a new pool of investors.

The transaction also shows that large institutions that own malls are seeing value in them, following a fall in values triggered by higher interest rates and Covid-19. Scentre and Barrenjoey made their move on the stake in the mall in April by launching an unlisted trust to own a half interest in the property, Adelaide's second largest mall. Their surprise move effectively thwarted a transaction that would have resulted in acquisitive funds house IP Generation purchasing the stake in the mall from the Dexus-managed fund selling it.

The move not only signals Scentre's entry into funds but this is expected to continue as more centres come up given the offer was oversubscribed. The deal also shows the large pricing recalibration of regional shopping centre assets since the boom times before the pandemic. Scentre Group Chief Executive Elliott Rusanow said the group had successfully partnered with Barrenjoey Private Capital to establish a fund to purchase a 50% share in Westfield Tea Tree Plaza and the adjoining Tea Tree Plus.

"The opportunity was oversubscribed, reflecting the strong demand from private investors to invest directly into one of our Westfield destinations," he said. "The group has retained its 50% interest and will continue to drive the strong operating performance of the centre." A Dexus spokesman confirmed the sale of the centre as part of the fund's proactive capital management strategy. The unlisted vehicle has been selling down assets to meet redemptions.

CBRE agent Simon Rooney negotiated the deal for the Dexus-managed fund as institutional and private capital flows back into the regional shopping centre market. The acquisition comes just weeks after the announcement of Vicinity Centre's agreement with the Future Fund to acquire its 50% interest in Lakeside Joondalup, Western Australia, with additional major retail transactions expected to be completed in coming months.