Brisbane headquartered private equity and syndication firm Altor Capital has sold the Cooloola Cove Shopping Centre for a price of $18.66 million to the listed SCA Property Group.
The off-market transaction was negotiated by Peter Tyson of Savills Retail Investments and has set a new benchmark yield for regional Queensland of 5.85%, surpassing previous records.
Cooloola Cove Shopping Centre is a Woolworths-anchored neighbourhood shopping centre located in the Cooloola region north of the Sunshine Coast. The largest residential development in Cooloola Cove is Cooloola Sands, a master planned community which is proposed to ultimately comprise over 800 homes.
The Centre comprises a modern single level, neighbourhood shopping centre which was completed in July 2009. It has a lettable area of approximately 4,300 square metres anchored by Woolworths with 10 specialty tenants along with grade level car parking for 233 vehicles.
Altor Capital divested the centre after purchasing it only three years prior, when it acquired the centre for $12.85 million in a transaction also brokered by Peter Tyson in 2018.
Altor Director Phil Rhodes commented “The original acquisition suited our investment model. We were attracted to the yield and growth potential, underpinned by long lease security to Woolworths and the ongoing population growth. Over our short term of ownership we focussed on repositioning the specialty tenant mix to a nucleus centred around daily needs and essential services.”
“After introducing new uses, including a large medical centre, and resetting existing core tenant leases, the strategy culminated in a sale of the asset delivering our investors strong running returns coupled with significant capital uplift,” said Rhodes.
Savills National Director of Retail Investments Peter Tyson noted “By focussing on daily needs, Altor’s strategy brought more rigour to the tenancy mix and drawing power of the centre and enhanced income.”
“Having followed the journey with Altor Capital and see their strategy delivered, it is pleasing to crystallise the outcome for the group with a record yield result.”
In summarising retail market conditions, Tyson also noted “The 2020 year was disrupted with the COVID-19 lockdown and remained supressed with the retail sector more thinly traded than prior years and numerous divestment plans aborted by would-be sellers.”
“Interestingly, the retail sector experienced a number of positive side effects from the COVID-19 experience, including an uplift in non-discretionary spending by consumers at the local neighbourhood centre. Investors have been quick to recognise the income security flowing from anchor tenants such as Woolworths and Coles, and low-risk nature of assets that service the demand for daily needs and essential services.”
“A further positive outcome has been monetary policy adjustments which saw the RBA move to cut interest rates at three intervals through the year by 65bps to the lowest level in Australian history, setting the cash rate at 0.10% in November.”
“The combination of these factors has seen heightened investor demand for quality retail centres. Convenience based neighbourhood centres anchored by Coles, Woolworths and IGA in the sub $30 million price point are becoming scarcer in the market” Tyson said.
“Throughout the GFC and again during COVID-19, this asset class has proven its resilience. Retailers deemed “essential” provide our communities with daily needs can continue to expect heavy traffic. The value these retailers offer goes far beyond product and revenue, they play an integral role in our society, from our food supply chain, to employment, to the availability of necessary goods and services.”
Tyson noted “Cooloola Cove Shopping Centre is the dominant food and service destination situated in a wide-ranging trade area. Located in the master planned residential community of Cooloola Sands the centre services an expansive trade area which also services the nearby communities of Tin Can Bay and Rainbow Beach.”
Our Views
This sale was announced by SCA Property Group in February as part of the Half Yearly results.
The three year hold appears to have paid off well for Altor Capital who are likely to have delivered in excess of a 25% IRR for their investors.
Neighbourhood Centres continue to dominant transactions activity due to their high non discretionary retail base and a much higher portion of income from a AAA rated tenant covenant. The asset size also makes them within reach of small syndicates and HNW and Family Office investors.
This asset has been acquired on an extremely sharp cap rate for a Centre with a very limited catchment area.
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