Federation Centres has struck a deal with Challenger to sell a half-share in six shopping mall assets for $602 million. The proceeds will be used to shore up the balance sheet for redevelopments and acquisitions. .
The assets are now owned by Federation and Retail Direct Property syndicates (previously the MCS Centro syndicates) and have a gross value of $1.2 billion.
Federation Centres chief executive Steven Sewell said the transaction was part of the retail landlord's strategy to engage in more co-ownership deals and release cash from the balance sheet to reduce gearing and for new developments.
Since settling the debt issues of the former Centro group and renaming the business, Mr Sewell has sold several centres in joint ventures, including with Perth's Perron Group, which took a half-stake in $1.38 billion of assets, and the super fund-backed ISPT, which took a half-stake in $742.8 million of centres.
Morgan Stanley analysts say Federation now benefits from the asset remix and a lower cost of debt. Mr Sewell said Federation would look to reduce the size of its debt facilities by up to $450 million in the near term and it expects pro forma gearing to drop to about 22 per cent.