Investor goes shopping in regional NSW

A REGIONAL NSW Woolworths Supermarket has sold for $16,500,000 in an off-market deal, reflecting a tight 4.4% yield, as standalone supermarkets continue draw in private investors.

Located in the regional town of Narrabri, around 251km northwest of Sydney, the 2,800sqm supermarket sits on 6,160sqm of land area with onsite parking for 83 cars and was developed in 2005 and was sold with 8.7 years lease term plus two 10 year options to Woolworths.

Peter Tyson and Jon Tyson from Savills’ retail investments team managed the off-market transaction on behalf of Whistles Funds Management, before selling at a sale rate nearing $5,900 per square metre to a private Melbourne-based investor.

“The targeted off-market process generated offers from numerous bidders and was dominated by savvy private investors,” said Peter Tyson.

“The most active buyer profile of the increasingly popular freestanding supermarket asset class has long been the agile private investor fraternity. Typically, these assets are tightly held and thinly traded, favoured by investors for the “bond-style annuity” characteristics underwritten by genuine long term lease commitments and high quality tenant covenants such as Woolworths and Coles”.

The property is located within the administrative centre of Australia’s second richest agricultural region, driven by the cotton, wheat, beef and lamb industries.

“The ownership profile of many standalone supermarkets nationally is dominated by high-net-worth private investors, typically domiciled in Melbourne and Sydney. Many of these groups own multiple supermarket holdings,” said Jon Tyson.

The latest regional supermarket deal follows another Savills transaction for a freestanding Woolworths for $20 million in Wagga Wagga, NSW. With Steven Lerche managing the sale on behalf of a private investor to Adelaide-based Parkstone Funds Management.

While Woolworths’ Sapphire Marketplace on the NSW south coast recently for more than $54 million to a private investor on a 6.05% capitalisation rate.

“Supermarket retailers invariably seek to secure long term leasing rights which, including options terms, can run for 50-60 years. These long-term commitments by essential service providers are amongst the longest lived leases in the marketplace,” concluded Tyson.