Market Insights

21.10.2019

Leongatha Woolies tops $33 million auction

– Stock market investors now looking to property for yield, safety –

A Woolworths supermarket in Leongatha topped the results board at CBRE’s 10th Premium Property Portfolio Auction (PPPA) at Zagames Ferrari dealership in Richmond with four properties selling for a total of $32.7 million on an average 5.4 per cent yield.

The freestanding, 3,143 square metre (GLA) Leongatha store was sold for $14.3 million on a 5.32 per cent yield to a Melbourne based investor with nine years of a 20 year lease to Woolworths remaining at a current income of $761,000 per annum net.

The tightest yield of the night went to the Woolworths Metro Abbotsford property which sold off-the-plan to a South Australian investor for $4.68 million on a yield of 4.93 per cent.

A third property, an ALDI store and two shops at Seville, sold to an international investor for $8.02 million on a 5.98 per cent yield, and a fourth property – a 7-Eleven at Armstrong Creek- sold to a second Melbourne based investor for $5.72 million on a 5.4 per cent yield. 

Now in its third year the PPPA drew a strong 250 + crowd with several bidders for each property for what was arguably the best grouping of properties to be offered via the platform since its inception.

CBRE Director Investments, Mark Wizel, said a high level of pent up demand for premium properties had been driven by the record low cost of debt and the lack of investment opportunities over the first half of 2019. 

“With only two freestanding supermarket investment opportunities offered to the market prior to this event it was clear that pent-up demand was a key factor in the clearance rate and the prices achieved. “While retail has not been as strong a performer this year this type of predominantly standalone property with a heavy weighting towards a non-discretionary spend tenancy profile, has been a favorite,’’ Mr Wizel said.

Mr Wizel said there had been a noticeable shift in buyer profile over the course of the year.

“Three out of the four buyers were new property market investors whose previous preference for investments had been cash or equities, however, given the low returns and volatility in the stock market, they are now turning their attention towards secure and higher yielding investment properties.

“I’ve no doubt this trend will continue to play out while global trade tensions and the negative impact on share markets and deposit and bond rates continues,’’ Mr Wizel said. 

Head of Premium Property Portfolio Auctions, Joseph Du Rieu, said off-shore investors had also shown a greater degree of interest in retail assets of late.

“The fact that the Australian dollar is now at a point which provides off-shore investors, or those sourcing their funds from off-shore, with an effective discount provides an additional level of incentive,’’ Mr Du Rieu said. 

Since its inception in 2017 the PPPA platform has successfully sold 54 properties for more than $472 million – including $198 million in supermarket investments – with an average clearance rate of 88 per cent.

Highlights have included the sale of Dan Murphy’s Alphington for $22.5 million on a tight 3.21 per cent yield, the standalone Coles Clayton for $17,115 million on a record 2.57 per cent yield, and Woolworths Burwood East for $18.15 million on a 4.57 per cent yield.

“Our aim for the PPPA was to deliver a portfolio of the highest quality so buyers knew that all properties being offered were premium and if they were unsuccessful in their first choice another property would be available.

“That was evident again tonight with multiple bidders competing for more than one asset including  the ALDI Supermarket under bidder who ultimately took home the 7-Eleven in Armstrong Creek,’’ Mr Du Rieu said.

He said the fifth property, a KFC outlet at Bundaberg East, was currently under negotiation following bids from four parties and expected a transaction to complete in the coming days.

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