This article is from the Australian Property Journal archive
JOINT-venture partners MaxCap Group and Troon Group have offloaded a newly completed large-format retail centre – built on a Melbourne site that was set to become a Kaufland hypermarket – for over $50 million an IOOF-managed trust.
Chirnside Lifestyle Centre, 32 kilometres north east of Melbourne’s CBD in Chirnside Park, was 100% pre-leased at the completion of construction in December 2022 and is has a tenancy profile dominated by national brands, including Harris Scarfe, Baby Bunting, Fantastic Furniture, and Super Cheap Auto. It traded on a 5.25% yield.
The centre has 11,100 sqm of gross lettable area, with 286 on-grade car bays, on a 3.5-hectare Maroondah Highway site underpinned by commercial 1 land zoning.
The joint venture also divested two pad sites directly to McDonald’s and KFC as part of the project.
“We identified the site in 2020 as part of the Kaufland supermarket portfolio just as the pandemic had put us all into lockdown. We had a strong conviction about the quality of the site and the opportunity,” said Tom McInerney, managing director of Troon Group.
Kaufland sold down infill sites across the country following its sensational exit from the Australian market – without opening one store.
“Through our existing relationships with the major retailers, we were able to quickly secure a mix of tenants that complement the precinct and de-risk the project with MaxCap,” McInerny said.
“This is our third joint venture with Troon Group, and we couldn’t be happier with the strong partnership we have built. This project continues to build on our long track record of success together,” said Simon Hulett, head of direct investment at MaxCap Group.
“The development represents a highly defensive retail investment backed by long leases to national tenants with strong covenants.
On the buy side of Chirnside Lifestyle Centre, IOOF Investment Services Ltd bought the asset for its AM Property Plus trust, part of the Direct Property Portfolio managed by MLC Asset Management, the investment division ASX-listed Insignia Financial Group.
Mark D’Arcy-Bean from MLC Asset Management, said Chirnside Lifestyle Centre was strategically acquired as a core addition to the business’s large-format retail (LFR) portfolio.
“Being a brand-new construction with annualised growth, Chirnside Lifestyle Centre will become a welcome addition to our LFR portfolio, given its strategic location within a rapidly growing area with opportunities for future development.”
The sale was managed by Colliers’ Tim McIntosh, James Wilson, and Mike Crittenden in conjunction with Stonebridge Property Group’s Justin Dowers, Kevin Tong and Phillip Gartland, who received interest from private, offshore and syndicate investors.
McIntosh said the “benchmark” result “reinforces the depth of buyer demand we continue to experience for bulletproof retail investments”.
“Chirnside Lifestyle Centre offers all the key investor ingredients, with a core metropolitan Melbourne location, significant weighting to national retailers on long leases, attractive rental growth and backed by underlying land value.”
He said the limited supply of high-quality metropolitan shopping centres has seen a growing theme of increased interstate and offshore purchaser activity. This is the AM Property Plus trust’s first retail investment in Victoria.
IOOF’s first large-format retail play was its $68 million acquisition of the brand-new Great Western Centre in Sydney’s Minchinbury two years ago.
Retail property capitalisation rates have jumped to 7.28%, according to The Data App, but these continue to be associated with bigger, destination-type shopping centres. Cap rates for smaller everyday needs types of centres, albeit having increased, remain low by historical standards.
