CEO OUTLOOK 2023: Sentinel Property Group

up became only the second owner of Casuarina Square after purchasing the centre from GPT for $418 million in the biggest deal in the Group’s history. It was the largest single shopping centre transaction in Australia for more than a decade and the biggest equity raise for an unlisted retail asset ever achieved in Australia. ‘Trophy’ retail assets such as Casuarina Square are irreplaceable. The complex has never been on the market in five decades and our opportunity to purchase only came after an approach to The GPT Group. Every man, woman and child in Darwin visits that shopping centre at least five times a month. If you’re a retailer and you want to come to the Northern Territory, Casuarina Square is where you go, it just dominates. Having the opportunity for Sentinel to acquire this asset was the stuff of dreams and it took a lot of patience for us to raise the capital during the COVID lockdown and get the deal done. Almost a year after purchasing Casuarina Square, we are so excited about its future, and we have big plans to be a major part of the growth in the Northern Territory. Casuarina Square, NT Big plans for Casuarina Built to code for tropical cyclones, Casuarina Square was tested in its infancy when Cyclone Tracy devastated Darwin in 1974. The centre currently consists of a GLA of 61,379m2, on a site of 11.79ha. Additionally, the site has substantial development potential, with the current town plan allowing an additional 54,282m2 of building area. The centre is anchored by Woolworths, Coles, Kmart, Big W, and BCC Cinemas with 190 supporting tenancies. The variety of revenue streams includes a 303-bed student accommodation facility leased to Uni-Lodge. Our vision for Casuarina Square is to eventually turn it into a town centre. Late last year, we acquired the Casuarina sporting club beside the shopping centre. In 2016, we bought the CasCom business centre, which is an office complex right beside Casuarina Square on two hectares. We now hold 15 hectares at Casuarina. Charles Darwin University needs accommodation for about 8,000 more students and we are looking to expand the existing student accommodation on our site. As part of our master plan, we also intend to build a hotel to further enhance the amenity. For Darwin to grow, Casuarina Square must also grow as a mixed-use precinct including retail, accommodation, and an employment node. At Sentinel, we are excited about what we can do at Casuarina and with our other investments in the Northern Territory – it’s a region I believe will provide some of the best economic opportunities in Australia over the next decade and beyond. We started a company a few months ago called Northern Australia Accommodation Solutions, which is partnering with a modular housing manufacturer. We have launched plans to build the student accommodation and other projects are in the works. While you might think we had enough on our plate dealing with Casuarina Square and the myriad of development opportunities there, we also purchased another market dominating shopping centre in 2022 – Caneland Central in Mackay for $280 million. Both the Casuarina and Caneland deals were brokered by JLL’s Sam Hatcher and Nick Willis. Caneland Central, Qld With 65,932m2 of GLA leased to about 200 tenants, Caneland is the largest regional shopping centre in Central Queensland, servicing a catchment of more than 175,000 people. Anchor tenants include Big W, Coles, Target and Woolworths, while it is the only shopping centre with a Myer within 390km. Like Casuarina Square, Caneland Central completely dominates its market. Every man, woman and child in Mackay comes to Caneland four times a month. You could never duplicate this centre and you also cannot find another 15ha site like this in the city, let alone close to the city. Working to improve our centres Sentinel only settled the purchase of Caneland Central in December, but we have already started improvements to the centre, which is the premier shopping and lifestyle destination in the Mackay region. Planned upgrades include the installation of a roof-mounted solar system and a new moving walkway. Owning two of regional Australia’s largest and most successful retail centres has meant the management team at Sentinel spends a lot of ‘hands on’ time these days in Darwin and Mackay. We have purchased staff accommodation in both cities. Sentinel’s team responsible for the performance of Casuarina Square and Caneland Central includes National Portfolio Manager Murray Scanlan and Senior Leasing Manager Austin Jones, who both have an enviable record in the management and leasing of major retail assets. Our marketing guru is Sentinel Chief Experience Officer (CXO) Michael ‘The Professor’ Sherlock, who made a name for himself as the Joint Founder of the Brumby’s bakery chain. We also have a top-level projects and design team led by Anthony Lloyd. Sentinel is a privately-owned property syndication business. I started Sentinel 13 years ago and the first property we bought was an industrial facility at Archerfield in Brisbane in January 2010 for $18 million. Since then, we have purchased more than $3 billion worth of property. We’ve sold about $1.2 billion and we’ve averaged 19.84% internal rate of return over that period – and that’s after paying monthly distributions. We’ll buy anything, anywhere, anytime, at a price. So, we always look for things that people don’t like. For the past few years, we have been focused on northern Australia. We have $1.6 billion invested north of Mackay. Sentinel was established during the GFC and, back then we bought homemaker centres when no one was buying them. We then subsequently sold. We bought a lot of properties in Western Australia when the market was down, we then sold. So, we’re counter-cyclical. Another Warren, the great Warren Buffett, says you’ve got to be fearful when others are greedy and greedy when others are fearful, and that’s what we do at Sentinel. Caneland Central, Qld Besides the retail centres in Darwin and Mackay, we also own the only direct factory outlet north of Brisbane, DFO Cairns, where we recently installed a roof-mounted solar system comprising more than 3,200 solar panels. We have owned DFO Cairns since 2016 and, combined with our ownership of homemaker centres and regional shopping centres, it shows we have a strong track record in retail. Our focus on investing in high-performing regional retail centres in northern Australia has been paying dividends with strong showings over the summer, despite the current gloomy economic outlook. Anyone who thinks the economy is going backwards should visit any of our shopping centres in Darwin, Mackay and Cairns, which have all performed exceptionally. Foot traffic at Casuarina Square for Boxing Day was up 8.5% on 2021, while in another key indicator of performance, the growing average spend per customer, has increased by 8.6%. Customers also flocked to Caneland Central in big numbers with 5.7 million visitors to the complex in 2022, up 1.4% on the previous year, while December foot traffic was up 4.5% with 626,000 visitors during the month. Food catering and homewares were strong performers with MAT growth for the year of 20.3% and 8.2% respectively. Average spend for the year was up 6.5%. While it has stronger competition than our market-dominating centres in Darwin and Mackay, foot traffic at DFO Cairns during the week leading up to Christmas and the Boxing Day sales was 35% up on the previous year, resulting in an MAT revenue increase of 7.5%. We look forward to continued success at our ‘Big Gun’ centres Casuarina Square and Caneland Central, and more strong performances from DFO Cairns.