- Centennial invests $66.8m in McGraths Hill Home large format retail (LFR) centre at 10 Industry Drive, Vineyard, Sydney – 40km north west of CBD
- McGraths Hill Home covers 3.78ha |16,478sq m GLA | 350 car parks | 4.4 year WALE | passing yield 5.6 per cent | strong value add upside | total trade area population growth 3.5 times Sydney average
- Fully leased 100% national tenants include Bunnings, Harvey Norman, BCF, Beacon Lighting, Petbarn
- McGraths Hill Home is Centennial’s second LFR buy in six months, boosting total retail assets to over $350m
- Vendor: Stirling Property Funds | Agent: CBRE – James Douglas
Centennial has acted on its assertion that large format retail (LFR) is one of Australia’s most attractive real estate sectors, acquiring Sydney’s McGraths Hill Home for $66.8m and marking its second major LFR acquisition in under six months.
The purchase expands Centennial’s retail portfolio to five assets valued at ~$350 million and follows the $52m acquisition of Brisbane’s HomeCo North Lakes large format retail centre it made earlier this year, taking the group’s investment in the LFR sector to around $120m.
The off-market acquisition of McGraths Hill Home was brokered by CBRE’s James Douglas on behalf of vendor, Stirling Property Funds and comprises a prominent 3.78ha site at Industry Drive, 40 km north west of Sydney’s CBD. The fully leased centre offers 16,478sq m of gross lettable area (GLA) with 100 per cent of income backed by national tenants including Bunnings, Harvey Norman, BCF, Beacon Lighting and Petbarn.
The centre is fully leased and offers near term positive rental uplift as tenancies expire and new remixing opportunities become available.
Centennial’s Head of Retail – Capital Transactions and Funds Management, Lucas Forbes said large format retail is one of Australia’s strongest real estate investment opportunities today. “The combination of population growth, constrained land supply, continued revenue growth from national retailers and stable recurring cashflows with embedded growth and low incentives, creates an attractive long-term income profile.
“It’s rare for a freehold LFR asset of this quality to be offered for sale in metro Sydney and also in one of the nation’s strongest growth areas. The north west corridor’s population is growing at around three-and-a-half times faster than Sydney’s average, and because large format retail performance is closely linked to population and housing growth, we believe this asset offers a strong defensive income profile.”
Not dissimilar to Brisbane’s North Lakes where Centennial first launched into the LFR sub-sector, the faster-than-average population growth in Sydney’s north west was a driving factor in Centennial choosing McGraths Hill for its second LFR investment.
Commenting on Centennial’s two LFR buys in under six months and what drew the investment manager and developer – widely known for its last mile and mid-size industrial and logistics projects – was David Cupit, Centennial’s Head of Funds Management.
“Our conviction is based on structural fundamentals rather than short-term market cycles,” he said.
“Large format retail has been on our radar for some time, but recent research definitely compelled us to act sooner, given LFR has delivered the strongest face rental growth of any retail sub-sector, with rents rising by 31per cent since 2020 in Sydney.
“Adding to that, large format retail remains closely linked to population growth and housing activity.
“While the sector has a discretionary element, demand is supported by a broad range of household spending, including new household formation, renovations and replacement purchases. This can provide some resilience through different stages of the economic cycle, particularly in locations experiencing sustained population growth and housing activity.”
Combined with limited new supply and low vacancy across the sector, Mr Cupit believes these fundamentals support the durability of LFR income over the longer term.
Centennial’s confidence in the sector has been reinforced by strong support from its longstanding wholesale and high net worth investors who were quick to participate in both closed ended raisings with ~$73m of capital spread across both LFR assets, within relatively short timeframes.
Centennial’s latest LFR acquisitions at McGraths Hill and North Lakes follows on from its purchase of the Portside Wharf retail assets in Brisbane’s upscale riverfront precinct of Hamilton, along with two sub-regional centres the group made with its Adelaide-based retail investment partner – Parkstone Funds Management – after jointly acquiring two major regional shopping centres in Bundaberg in Queensland and in Orange, New South Wales.
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