This article is from the Australian Property Journal archive
TWO supermarkets have changed hands for over $50 million with Colin De Lutis’ DeGroup paying a record price for a regional Coles and at the same time, a Chinese investor has set a new yield benchmark with the acquisition of the Pace of Ascot Vale.
DeGroup has acquired the Coles Woodend for $33.3 million on a 4.31% yield.
Stonebridge Property Group acted as sole agent on behalf of Coles Group Property Developments Ltd.
The 3,780sqm regional freestanding supermarket sold for $33,300,000, which represented a 4.31% yield.
Agents Kevin Tong and Justin Dowers said this was the first freestanding supermarket sale in Victoria of 2021, following a year of very limited supply and the sale price is a record regional Victorian freestanding supermarket investment.
“The campaign was highly competitive with the asset yielding 14 formal offers with the DeGroup eventuating as the successful party,” they said.
De Lutis said Coles Woodend is a set and forget investment which is ideal for its super fund.
“We also saw a major opportunity to take advantage of the current market dislocation in pricing between retail investment yields and bond rates, which we expect to continue for some time to come. The defensive nature of this asset is further strengthened due to its 10 year WALE.
“Our core focus with Coles Woodend will allow us to further leverage our portfolio scale which includes Sanctuary Lakes Shopping Centre, The Village Bacchus Marsh & Somerville Central which are all convenience style shopping centres. We still see a great future for shopping centres in this country, providing they are ‘right-sized’ for their catchment and are skewed towards food, convenience & services with emphasis on daily needs offerings,” Lutis said.
Coles’ chief sustainability, property and export officer Thinus Keeve said: “We’re always working to optimise our property portfolio and aim for our developments to play an integral part in the local communities that they serve.”
“What became clear as soon the marketing campaign for Coles Woodend commenced was the sentiment for this type of investment product had heightened, particularly due to an increase in supermarket sales performance. This further cements these investments as the go-to recession or pandemic proof investment, similar to that of certain logistics assets,” Dowers said.
The market continues to see the compression of yields in the retail asset class.
“Based on the Coles Woodend result, it would appear that yields for new, freestanding supermarkets investments have sharpened in the order of 75 to 100 basis points within 12 months,” he added.
Tong said regional investments have continued to benefit from the aftermath of COVID-19, with the work from home trend allowing Victorians more freedom to move to regional locations.
“Due to the population growth that regional Victoria is experiencing, in addition to the 50% stamp duty savings, it is becoming evident that regional Victorian retail yields are compressing to a level close to, and in some cases in line with, Metropolitan Melbourne,” he continued.
Meanwhile Pace Development Group has set new industry benchmark, selling four tenancies at its Pace of Ascot Vale project, including a Metro Woolworths, to a local Chinese investor.
The 2,253sqm holding sold for $19.15 million on a yield of 4.63%, above the price expectations set at approximately $17 million.
Located at 327-357 Mt Alexander Road, the four retail tenancies are on the ground floor of a 76-apartment residential complex.
The sale was handled by Tong, Dowers and colleague Rorey James in conjunction with JLL’s Stuart Taylor, Tom Noonan and MingXuan Li.
The agents said competition was fierce from the outset, with over 300 enquiries and 15 interested parties, including private local and offshore investors. The transaction went through three rounds of negotiations, before eventually closing approximately 13% above the expected range.
Tong said the extraordinary result was evidence of the market’s increasingly strong appetite for suburban retail opportunities.
“What was clear throughout the sales process was the sentiment for this type of investment continues to grow, particularly due to the strong supermarket covenant in addition to the pandemic-proof nature of a Woolworths supermarket,” said Tong.
“This is the second supermarket our team have transacted to this investor, who only entered the retail investment market in 2017. A strong driver for buyers’ interest was the current low interest rate environment in addition to the opportunity to capitalise on the 5.5% stamp duty before the rise to 6.5% on 1st July 2021.”
Taylor said the yield achieved sets a new industry benchmark, being the sharpest yield for a strata-titled neighbourhood shopping centre in Victoria on record.
“The price and yield also reflect new records for a ‘Woolworths Metro’ investment nationally, highlighting the incredible demand for non-discretionary retail assets in the current market” Taylor added.
Pace commercial director James Simpson said the sale was the realisation of its strategy.
“The incredible result that Pace achieved on this deal at Pace of Ascot of Vale paves the way for further acquisitions to be added to our pipeline and brings forward plans at other key projects across Melbourne.
“We are about to commence construction at 6 Cubitt Street, Cremorne in September and have just received a permit for our Hawthorn East office project, which we are looking to bring to market at the end of this year.” Simpson said.
Pace was also advised by the newly established Advise Transact founded by Mark Wizel.
These transactions come as shopping centre transaction activity reached a multi-year high in June quarter, according to The Data App.
Shopping centre transactions totalled over $954.4 million during the three month period, up a whopping 318% on the $228.5 million seen in the same period last year, according to figures from The Data App.
Last Charter Hall and Abacus acquired a stake in Myer’s flagship Melbourne store for $135.2 million each.
