This article is from the Australian Property Journal archive
TASMANIA has seen its largest-ever single-asset retail sale, as Challenger Group furthered its asset selldown with the $82.5 million divestment of Channel Court.
Located on the southern outskirts of Tasmania in Kingston, Channel Court is anchored by a full-line Woolworths and Big W and has 84 speciality shops supported by local grocer Salamanca Fresh. It is the largest and only sub-regional centre south of the Hobart CBD with over 25,000 sqm of floor space and generates over $150 million in moving annual turnover.
Kingston experienced an 11.8% total population growth between 2016 and 2021.
Challenger bought the asset for $76 million in 2015, and its carrying value at the end of December was recorded at $87 million, with a capitalisation rate of 7.25%. Its peak value was $89 million.
The new sale price came in on a cap rate of 7.5%.
Nick Willis and Sam Hatcher from JLL managed the expressions of interest campaign.
They said broad interest and seven formal bids were received, reaffirming continued market demand for dominant convenience-based sub-regional centres.
On the buy-side is wealthy investor Nick DiMauro, of the DiMauro family which has a reported $1 billion-plus portfolio of shopping centres and office buildings.
“We are continuing to see a shift in the weight of capital seeking these sub-regional assets both locally and offshore. The buyer profile continues to evolve attracted to the sectors fundamentals and value propositions.” Willis said.
“In the prior four years (2020 to 2024) an accumulative 77% of sub-regionals sold have been to syndicators and private investors, the prior four years to that (2019 to 2015) conversely 76% was to institutional owners.”
Retail transaction volumes clocked $1.8 billion as at the end of June, according to JLL, in line with the prior year but 41% down on the three-year historic average. The reduction in transaction volumes is being attributed to the limited availability of investment supply.
Hatcher said 2024 has seen the market enter a phase of supply and investor demand imbalance, specifically in the sub-regional and large format retail sub-sectors where volumes are down approximately 13%.
“As major institutions enter the tail-end of their disposal programs and the fundamentals of the sector continue to improve globally the sector is again receiving resounding positive engagement, driving renewed interest and competitive bidding.
“Whilst the first half of the year has seen a significant reduction in available supply, we do anticipate increased supply offering in the second half of the year.”
Challenger Group and co-owner Vicinity Centres last month sold Karratha City shopping centre, in Western Australia’s Pilbara region, for $95.9 million.
Nathan Lin of JLL said the Channel Court offering was supported by macro-fundamentals, and investors were attracted to the relatively low average rents – some 43% below the benchmark.
“This combined with zero vacancy and occupancy costs of approximately 7% reinforced the long-term income growth trajectory of the asset.”
