This article is from the Australian Property Journal archive
IN what is touted as the biggest large-format retail transaction since late last year, HomeCo Daily Needs REIT has offloaded HomeCo Midland in Perth to investor and developer PWD for $75 million.
Situated in the burgeoning Midland region, 15 kilometres north west of the Perth CBD, the asset comprises 23,400 sqm of lettable area and direct at-grade car parking.
JLL’s Nick Willis and Sam Hatcher jointly with Vend Property’s Jeff Klopper handled the divestment of HomeCo Midland.
In a year in which market activity has slowed to a crawl, large-format retail (LFR) assets have been one of the most thinly traded asset classes in the retail sector. Volumes for retail transactions in the first half of 2023 are down 50% on the previous year, and with only 30 deals, this year’s first half now represents the lowest on record.
“Given the robust performance of the LFR sector and its strong underlying fundamentals being land rich and almost irreplaceable given the rise in construction costs, we are continuing to see demand from well-capitalised parties able to transact. However, amassing portfolios of scale is difficult with investment supply of institutional-grade assets tightly held, as the majority of the market is controlled by a handful of players,” Willis said.
Western Australia and the broader national LFR market remains tightly held and controlled by a limited number of key ownership groups including HomeCo’s Daily Needs REIT and Harvey Norman, Hatcher added.
The sale comes hot on the heels of Hong Kong private investment firm PAG snapping up Midland Gate for a discounted price of $465 million, in Perth’s first major regional shopping centre sale this year. PAG acquired Midland Gate from the Vicinity Retail Partnership and from the Commonwealth Bank Group Super.
Hatcher said the sale of HomeCo Midland is a major LFR transaction for Western Australia, a market that only experiences on average two LFR deals per annum.
LFR properties have continued to be sought after in the post-pandemic environment due to an increasingly diversified tenant base and an improving quality of tenants..
Andrew Quillfeldt, head of capital markets research at JLL said large format retail has benefitted from cyclical and structural sector themes, with the cyclical surge in retail spending on household goods from a variety of factors including home renovations, has resulted in sales growing by 24% since the start of 2020, supporting rental reversions within the sector.
Banjo Bond, a founding director of PWD said, “This is an irreplaceable asset located on a large land holding near major road infrastructure, with income underpinned by major national tenants. The investment proposition is highly compelling with retail trade in WA remaining the most robust in the country.”
PWD co-founder Rob Thomas added, “With significant barriers to entry for new product in Perth we look forward to strong trading growth in this Centre supported by major population increases forecast in nearby growth centres.”
Other notable large-format retail deals this year have included the sale of HomeCo Epping in Melbourne to Forza Capital for $70.25 million, joint-venture partners MaxCap Group and Troon Group offloading a newly completed large-format retail centre – built on a Melbourne site that was set to become a Kaufland hypermarket – for over $50 million to an IOOF-managed trust, and Rothwell Central, in Queensland, acquired by OzProp Holdings for $41.0 million.
