This article is from the Australian Property Journal archive
THE Woolworths-anchored Pakington Strand in Geelong West has sold on a sub-5.50% yield as buyers and sellers feel their way through the early 2024 market.
The centre was returning a fully leased net income of around $1.7 million at the time of sale, according to Colliers’ Tim McIntosh and James Wilson, who sold the 5,317 sqm centre with Stonebridge’s Kevin Tong and Justin Dowers on behalf of APH Holding,
APH Holding acquired the centre in 2016 for $32 million on a passing yield of 4.7% and fully leased yield of around 5.2%.
Price discovery has become a major challenge as the gap between buyers and sellers, which together with the impact of higher interest rates and cost of debt, has dragged down Australian commercial real estate transactions to decade lows. Transactions slumped by nearly half to $39.6 billion last year, according MSCI.
At Pakington Strand, the high-performing full-line Woolworths supermarket pays percentage rent and is supported by 13 tenants including Subway and Brumby’s and has a long weighted average lease expiry of 12.4 years by area.
The centre is prominently positioned on the popular Pakington Street retail strip on a 2.1-hectare mixed-use site with 307 on-grade car spaces.
Pakington Strand is located in Geelong West, one of Geelong’s wealthiest suburbs, two kilometres from the Geelong CBD.
APH Holding will begin 2024 with a renewed focus on their City Park masterplan in Melbourne’s east with the first stage, a new retail experience, starting construction later this year.
“The benchmark result and depth of interest in Pakington Strand from private and offshore investors, listed and unlisted groups as well as developers reinforces the resilient buyer demand for well-credentialed Victorian neighbourhood shopping centres,” McIntosh said.
The centre was unconditionally sold to a high net worth private investor after a two-round process at the end of the campaign – just the fifth neighbourhood shopping to be brought to market in Victoria in the past last year – which generated in excess of 300 inquiries across both agencies with a dozen offers received at the close of the campaign.
“We continue to field strong depth of buyer interest from local and offshore investors as 2023 saw another year of limited neighbourhood shopping centre opportunities offered publicly on the market,” Tong said.
“Although the purchaser was based in Victoria, we witnessed strong competition from offshore investors with multiple groups forming our underbidders.”
There were just five recorded sales of neighbourhood centres across Victoria in 2023, 40% down on the 10-year state average and consistent with the national theme showing a 43% reduction in transaction volumes over the same period.
According to The Data App, the bulk of transactions across the wider retail sector have been for neighbourhood shopping centres. Recent Victorian sales in the sub-sector have included Torquay Village, which traded for around $50 million.
