From Supercheap to Salvos, retail assets earn investors’ favour
Bricks-and-mortar retail property on long leases to major tenants such as Hungry Jack’s, Bridgestone, Supercheap Auto and Salvos Stores was the standout asset class across two days of commercial property auctions in Sydney and Melbourne this week.
While buyers and vendors did not see eye to eye on many assets – just 10 out of 22 properties sold under the hammer, a clearance rate of 45 per cent – there were 96 bids for a Bridgestone Tyre & Auto centre in Melbourne’s outer suburbs.
Offered with three years remaining on a five-year lease to Japanese multinational Bridgestone Corporation and a five-year renewal option, the industrial-zoned property on Canterbury Road in Kilsyth South – 32 kilometres east of the CBD – sold for $3.305 million, on a tight yield of 4.15 per cent, to a Melbourne-based investor.
The vendor was a company associated with prominent Adelaide businessman Jamie McClurg, the executive chairman and controlling shareholder of developer Commercial & General.
Selling agent Neville Smith from agency Burgess & Rawson, which put together the auction line-up, said the strategic nature of the site – between a Red Rooster and a McDonald’s – was a major drawcard for buyers alongside the secure lease to Bridgestone and future development potential.
“It’s a very large site with the ability, subject to council approval, to accommodate more of the same,” Mr Smith said.
“Everyone needs four tyres on their vehicle, no matter if it’s a diesel, electric or petrol car.”
The 659 sq m centre occupies just 20 per cent of the 3142 sq m site and brings in annual rent of just over $137,000. The lease is indexed to inflation and includes a five-year renewal option to Bridgestone.
“The land alone would be worth $1100 to $1200 per square metre, so the investors have [essentially] got the building for free,” Mr Smith said.
While several retail properties were passed in, including a new Guzman y Gomez restaurant in Newcastle and a Starbucks cafe in Brisbane, five of the 10 properties (worth $35.5 million in total) that sold under the hammer on Tuesday and Wednesday were shops.
They included a Supercheap Auto centre and neighbouring Salvos charity shop in Australind, just north of Bunbury in regional Western Australia, both of which were purchased by WA-based investors.
The Supercheap centre was offered with an eight-year lease to ASX-listed Super Retail Group with 3.5 per cent annual rent increases and on landlord-favourable terms, including that the tenant pays all outgoings as well as land tax. It sold for $3.455 million on a 5.1 per cent yield.
The Salvos store was offered with a lease until 2028 and renewal options until 2038, 3.5 per cent annual rent increases and all outgoings and land tax paid by the tenant. It sold for $2.325 million on a 6.3 per cent yield.
Both Australind properties were offered by their developer, Melbourne-based Merion Properties led by Martyn Toogood and Jason Perry.
Mr Toogood said both sales were a “terrific result”, especially the Supercheap Auto sale. He said it was pleasing to see WA buyers – a Bunbury investor acquired the Supercheap Auto and a Perth-based investor the Salvos – starting to understand the commercial property investment market.
“Traditionally, it’s been buyers in the eastern states buying assets in WA, so it’s nice to see locals bid for [and get] these properties,” he said.
In Sydney, the top result was $5.83 million secured for a Hungry Jack’s restaurant that forms part of a new retail hub in Tighes Hill, a suburb of Newcastle, being built by the Stevens Group. It sold on a yield of 4.99 per cent, continuing the strong run of results achieved at auction for the popular fast-food chain.
However, while shares in Mexican-themed chain Guzman y Gomez have surged since its initial public offering in June, a new restaurant developed by the Stevens Group in the same precinct was passed in.
“Fast food generally is a pretty attractive asset class that always sells pretty well,” said Stevens Group development director Jason Capuano.
But while its Hungry Jack’s offering generated the strongest bidding for any lot at the Sydney auction on Tuesday, Mr Capuano said bidding did not quite get to the expected level for the GyG asset. He attributed it to mum-and-dad investors not knowing the brand as well as the more famous burger chain.
“We’re negotiating with two or three parties so should get a deal done on the GyG restaurant,” he said.
Other retail properties to sell under the hammer included a Cellarbrations liquor store in Monbulk in the Yarra Ranges north of Melbourne ($1.2 million on a 5.2 per cent yield) and an Indian restaurant in Epping in Melbourne’s north ($1,033 million, 6 per cent yield)
Social infrastructure and healthcare assets also found buyers, including a Sonic Healthcare medical clinic in Gosford on the NSW Central Coast ($7.3 million, 7 per cent yield), a medical complex in Werribee south-west of Melbourne ($2.6 million, 5.5 per cent) an Insight Early Learning centre in Dubbo ($5.08 million, 6.4 per cent yield) and a Nido Early School centre in Woodend in Victoria’s Macedon Ranges ($3.34 million, 6 per cent).
