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Market Insights

09.07.2019

Sydney investor pays $47m for Coburg North Village

The prized Coburg North Village shopping centre has been snapped up by a Sydney based investor after an expressions of interest campaign which drew strong competition from local and off-shore buyers.

The price, on a 4.7 per cent yield, represents a hefty premium on the previous sale in November 2016 when another private investor paid $38 million on a 4.94 per cent yield.  

According to CBRE Director, Mark Wizel, who marketed the property with Victorian Retail Director, Justin Dowers, the sale reflected positive market sentiment for well managed centres, which through meeting community and shopper demands, continued to experience capital appreciation underwritten by rental growth. 

“There is no doubt that the market for such assets is not as rosy as it has been in previous years and that is always going to affect the level of enquiry and the negotiating process.

“But on the positive side there remains an astute investment cohort who are wedded to the retail sector as the traditional defensive asset class that it is, and of course that is particularly the case for well managed centres,’’ Mr Wizel said.

He said the appetite of banks to fund A grade retail remained strong, allowing prime grade yields to continue to tighten due to the low cost of debt. 

The relatively new neighbourhood centre, which opened in August 2015, comprises a state-of-the-art, full-line Coles Supermarket and Liquorland of 4175 square metres, supported by 15 convenience based specialty retailers, including a medical centre and pharmacy, and provides sensor-activated on-grade parking for 303 vehicles.

The long-term Coles/Liquorland lease (expires 2031) accounts for more than 60 per cent of the the 6284 square metre centre’s WALE with total returns at more than $2.4 million per annum. 

Mr Dowers said the property’s significant future development upside with a highly exposed site of 18,560 square metres and substantial frontages to Gaffney and Sussex streets, was an important attribute.

“Investors looking for a quality asset were acutely aware of the investment value provided by the property’s significant weighting towards non-discretionary based tenancies but there was also a definite leaning towards the asset’s future prospects.

“The predilection for properties with serious development upside has been trending for the last 12 months now, especially among off-shore interests, and again it was a factor here,’’ Mr Dowers said. 

Mr Dowers said Coburg Village also benefitted from a trade catchment of in excess of 46,000 residents which was forecast to grow to 52,050 by 2026 – an increase of 12 per cent for the period.

He said the growing catchment added to the centre’s substantial investment credentials including the prime inner-metropolitan location, the strong trading performance of Coles and the availability of tax depreciation benefits.

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