The strength of the neighbourhood retail sector has been tested again with the sale the Bellarine Village Shopping Centre at a yield of 5%.
Located on the Bellarine Highway at Newcomb, the 10,443sqm neighborhood centre is anchored by Woolworths (25yr lease) and Dan Murphys (15yrs) and includes another 16 specialty retailers including The Reject Shop (5yr lease), Safeway Petrol Plus (5yrs) and Hungry Jacks (15yrs).
The 2.3 hectare site has four street frontages, four access points and provides parking for 315 cars.
The Centre was sold by the Zahra family’s Westrent Properties who had acquired the asset in 2018 for $36.5m and have now on sold it for $38mto a private investor.
Stuart Taylor of JLL was reported to have facilitated the off market transaction for Westrent Properties.
So far in 2021, over $400m of Neighbourhood Centres have exchanged hands with an average cap rate of c 5.75%. These Centres include;
- Cadens Corner $60m,
- Greggory Hills $68m,
- Ropes Crossing $42m,
- Woolworths Torquay Central $25.1m,
- North Adelaide Village $50m and
- Entrada Shopping Centre $41m.
Whilst the Super Regional and Regional Centres are facing challenging times ahead with decreasing rents, increasing vacancies, the loss of major stores and a need for more capital, their smaller counterparts are enjoying the strength of their offer with renewed interest from a range of investors; REITs, Private Syndicates, SMSFs, high net worth investors and family offices.
Our Views
We favour Neighbourhood Mall investments due to the high proportion of non-discretionary retail business, the long average lease expiry and the highly convenient offer encouraging multiple trips customer per week. Neighbourhood Malls do however need to have several critical characteristics in order for them to be successful.
Successful Neighbourhood Centres need to be both well located and easily accessible to their catchment. Some Centres which appear to be well located are very difficult to get into and out of and are more at risk to competition than those which are highly accessible.
The better Centres also have the right mix of fresh food, cooked food (either dine in or takeaway) and a range of personal services – all of which are highly relevant to their immediate catchment. An abundance of car parking with flat direct access to the Centre is essential. Quick Service Restaurants and fuel stations on the periphery of the Centre are also desirable.
We favour malls with no or very little common areas and we would avoid Centres in regional and coastal towns in favour metropolitan areas.
Our partner company is currently finalising a Neighbourhood Convenience Fund (now fully subscribed) which will initially acquire 3 Centres and is forecast to deliver a cash distribution yield of 8% per annum and a total return over a 5 year period in excess of 11.5% IRR net of fees. Please feel free to contact us for further information.
Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
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