Charter Hall Direct Long WALE Fund has acquired Coles Five Dock, a stratum titled supermarket in the inner western suburbs of Sydney for $25.9 million, reflecting a competitive sharp yield of 4.29%. Colliers’ James Wilson and Alex James-Elliott negotiated the sale via an on-market EOI process conducted during the second Sydney lockdowns. The supermarket last transacted in 2017 for $19.66 million.
“We are experiencing unprecedented demand from investors seeking to deploy capital into ‘pandemic-proof’ assets with strong catchment drivers, long-term income growth and covenant security. The strong result achieved for Coles Five Dock was achieved given 11 offers were received despite Sydney being under lockdown conditions and reflects the growing demand of institutional and private capital targeting this asset class,” said James Wilson, National Director (NSW) of Retail Investment Services at Colliers.
Single-tenanted retail assets, in particular ‘essential service’ supermarkets, are in strong demand due to their resilient, ‘pandemic-proof’ income stream and a significant lack of stock throughout 2020. Only 12 freestanding supermarket assets transacted last year nationally, for a combined $157.4 million in value, reflecting a significant 63.4% decrease in volume recorded from 2019. However, freestanding supermarket assets have rebounded strongly in 2021 with the average yield compressing by 0.61 basis points to 4.86% on 2020 figures.
A recent comparable transaction is Woolworths Metro Ascot Value, also a volumetric titled supermarket located in the inner rings of Melbourne. The centre transacted in June 2021 for $19.15 million on a 4.63% yield. Despite Coles Five Dock being publicly marketed and transacted during lockdown restrictions, the strong demand from both domestic and offshore investors drove yield compression; Coles Five Dock sold for $25.9 million on a 4.29% yield.
“The campaign received strong engagement from both local, interstate and international Private Investors. They were attracted to not only the asset’s property fundamentals, but also the extremely rare nature of the lease which provided the ability to capture future income growth via percentage rent. There remains a significant amount of unsatisfied capital seeking retail investments across NSW.” said Alex James-Elliot, Associate Director (NSW) of Retail Investment Services at Colliers.
The trophy asset comprises a modern Coles Supermarket supported by a single restaurant specialty across a GLAR of 3,550 sqm with two levels of convenient basement parking. Coles is secured on a rare 20-year lease to 2036 with extensive options to 2076, and is already paying percentage rent. Coles Five Dock is located in the affluent inner west of Sydney, approximately 9 kilometres from the CBD.
Collier’s agents James Wilson and Alex James-Elliott are also currently marketing Woolworths Omnia, Potts Point with the EOI closing 2:00pm (AEST) on Thursday, 2 September 2021.