This article is from the Australian Property Journal archive
COLES has offloaded Flagstone Village neighbourhood shopping centre in south east Queensland for more than $26 million to a high-net-worth private investor.
CBRE’s Joe Tynan and Michael Hedger negotiated the transaction on behalf of Coles Property Group via an expressions of interest campaign that few over 165 enquiries and four competitive offers.
The top bidder, a Sydney-based investor, presented an unconditional offer that reflected a yield of circa 6%.
The recently constructed centre has a gross lettable area of 4,604 sqm and is anchored by a 3,614 sqm high performing, full-line Coles supermarket. It includes seven specialty retail tenants and provides strong security via a long 7.7-year weighted average lease expiry (WALE) by income.
“Investors continue to actively pursue new neighbourhood shopping centres with a clear focus on defensive, non-discretionary retail assets given the highly resilient nature of these investments,” Tynan said.
He said the strategic location of Flagstone Village was one of the key attractions for the purchaser, with the Flagstone region identified as a Priority Development Area and Queensland’s second-largest residential growth corridor, with forecast population growth of 8.6% per annum until 2041. The centre offers the region’s largest full-line supermarket servicing the main trade area.
Hedger noted that there was a limited construction pipeline of high-quality neighbourhood shopping centres, with Flagstone Village presenting a rare opportunity to acquire such an asset for below replacement costs. This follows a rise in construction prices, which have impacted development feasibilities.
“A limited number of shopping centres have been formally offered to the market this year, with transactions volumes in 2023 being at one of the lowest levels in 15 years,” Hedger said.
CBRE data shows the neighbourhood sector has dominated the total national sales volume, accounting for 64% of all shopping centre transactions, as investors look for resilient assets with predictable cashflow. CBRE expects this to continue in 2024.
Shopping centre sales pick up in pre-Christmas rush
Shopping centre sales have been starting to pick up amid the pre-Christmas rush, according to The Data App, albeit off a very low base, with the bulk of transactions for neighbourhood shopping centres such as Torquay Village, which sold for around $50 million. The research firm’s director, Rob Ellis, said there are “few signs yet that a meaningful upswing is unfolding”.
As parties rush to tie up deals before the end of the year, the retail sector has just seen fund manager Fawkner Property add to its run of major shopping mall purchases with the $390 million acquisition of Cairns Central in far north Queensland, in the second-biggest retail sector deal of 2023.
The Cairns Central deal comes hot on the heels of Charter Hall Retail REIT offloading $225.5 million worth of shopping centres in Adelaide’s Morphett Vale and Rosebud, on the edge of Melbourne, in line with book valuations following unsolicited off-market offers, and property fund manager Haben taking full control of the Stockland Townsville shopping centre, acquiring the remaining half-stake and management rights for $123.5 million. The price is a 9.5% discount to that centre’s June book valuation, and the deal follows Haben picking up an initial half stake in September for $115 million, at an 11.5% discount.
Both stakes were bought on yields of about 8%.
