Interest is strengthening in the smaller end of the Neighbourhood Centres as evidenced by the recent sale of 4 centres for a total of $92.7M. In what is becoming known as “Neighbourhood Convenience Retail” (NCR) these Centres are differentiated to their larger “Neighbourhood Centre” cousins by being predominantly comprised a major supermarket with up to just 15 tenancies fronting a car park. Typically being developed by Woolworths, Coles and a number of specialty developers, investors are being attracted to the lower risks to the asset class than is offered by the larger retail centres which are at risk to changes in discretionary spending habits. Neighbourhood Convenience Retail Centres are typically passed over by institutional capital due to the lower capital capable of deployment, however the investment characteristics of the sub sector offer a compelling story as a commercial grade asset; long leases to high quality tenants, quality locations, income growth and liquidity. The largest of these NCR assets to trade this week was the Coles Kedron Centre was sold for $34.2M on a cap rate of 5.0%. The Centre which comprises a brand-new, “state of the art” full-line Coles Supermarket, Liquorland, a specialty Cafe and a Coles Express Service Station. The Centre offered a WALE security of 14.73 years by area. Woolworths also sold their Lara and Carlewis NCR assets, both in Victoria. The Lara Centre was sold for $21M at a 6.1% yield and the Carlewis Centre was sold for $17M at a 6.5% yield. Both Centres were anchored by a full line supermarket and with a mix of convenience based specialty stores adjoining the supermarket. The fourth NCR recently sold was the Markets Flagstone Village (QLD) a 12,700sqm site comprising a 7-11, IGA Supermarket, Snap Fitness, BWS, Dominos, Vet Love and a Terry White Chemist. The Centre was sold on a 5.96% cap rate for $20.5M to a private investor. We expect interest in this sub-sector will remain strong.
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