This article is from the Australian Property Journal archive
FUND manager FRP Capital has grabbed convenience-based Adelaide sub-regional retail centre Brickworks Marketplace for $85 million after making an unsolicited offer to owners Charter Hall Retail REIT (CQR) and Telstra Super.
The sale price represents a 6.1% premium to the December 2022 book value, a 5.43% yield and a capital value rate of $4,953 per sqm, as convenience-based retail assets continue to perform well amid the economic slowdown and remain high in popularity.
JLL’s Nick Willis and Sam Hatcher sold Brickworks Marketplace after tabling the offer.
Brickworks Marketplace is situated on 4.44 hectares of land at the northwest corner of Aswin Parade and South Roads in Torrensville, 4.9 kilometres north west of the Adelaide CBD, and adjacent to a nine-hectare site that AFL club the Adelaide Crows has proposed as their new headquarters as part of the Thebarton Oval Precinct Masterplan.
Completed in 2015, the 17,300 sqm centre is anchored by Woolworths, Big W and Dan Murphy’s, supported by a Direct Chemist Outlet and 40 specialty stores in addition to 680 car parks.
It sold with 96% occupancy and a weighted average lease expiry of 9.3 years.
FRP Capital was attracted to the non-discretionary tenant mix and growing catchment area.
“Flagship centres on significant land holdings, within a 5km radius of capital cities, do not come up very often (if at all),” Benjamin Fusco, one of FRP Capital’s directors, said.
FRP Capital now has funds under management of over $250 million with commercial property assets in South Australia, Western Australia and New South Wales.
Brickworks is the seventh sub-regional asset to have transacted in the first half of 2023, the agents said, representing 32% of total retail transactions, up 21% from the year prior. They said Sub-regional centres are seeing an increase of capital favoured towards the sub-sector due to their strong investment thematic, and for Brickworks in particular, the long WALE outlining security in the income.
“We are continuing to see increased levels of activity and capital focused on the sub-regional sector given the assets’ relative returns and large land holdings providing future mixed-use potential,” Hatcher said.
Singaporean sovereign wealth fund GIC is hoping for $250 million for its half-interest in north Perth’s Whitford City, while Nikos Property Group recently forged its second partnership with Vicinity Centres, acquiring a 50% interest in the Broadmeadows Central shopping centre from the ASX-listed retail landlord for $134.5 million.
Capitalisation rates across the retail sector have jumped by more than 200 basis points, according to The Data App, driven by sub-regional and larger assets.
JLL data shows transacted volumes of sub-regional centres are over 40% above the five-year average for the first half of 2023.
“Capital is attracted to the relative return spread this sub-sector is providing, in addition to the robust performance and value add potential.”
Charter Hall Retail CEO Ben Ellis said, “Our partnership with Telstra Super has been long and successful with RP1 delivering a 12% equity IRR since inception of the partnership in 2011,” said.
Willis said South Australia is a tightly held market, historically dominated by long-term generational family holders, and that assets in such proximity to the CBD and on large land holdings like Brickworks are rarely traded in any capital city.
The retail sector’s large falls in valuation during the pandemic should limit the impact on asset class in the current economic slowdown and high interest rate environment, according to a note from Fitch Ratings’ latest Australian REITs Monitor.
