Grocery giant Coles will tap investors’ appetite for non-discretionary retail assets as it seeks to offload a supermarket and Kmart store in Boronia, in Melbourne’s outer eastern suburbs.
The Boronia supermarket and established Kmart have a combined gross leasing area of 10,000 square metres.
The outlets in the Boronia Mall, in Floriston Road adjacent to another retail centre Boronia Central, generate estimated net income of $2.05 million from leases to ASX-listed retailers Coles Group and Wesfarmers.
Coles has a 12-year lease over 3000 square metres and the Kmart lease will expire in six years.
Sold together on one strata title, they are expected to fetch more than $30 million as investors skew towards defensive non-discretionary property – everyone has to eat – as an effective financial bulwark in uncertain retail times.
Justin Dowers from CBRE, the agency marketing the property, said investors were looking for yield in a market short of quality investment stock.
Both tenants were performing above industry benchmarks, showing year on year growth, while the Kmart store was significantly “under-rented,” reflecting a per sq m rate of $108 net, he said.
The listing follows a run of Coles-leased property transactions.
Private investors are understood to have purchased two Coles supermarkets and a Kmart in Northcote Plaza, in Melbourne’s inner north, for a combined $60 million.
The Northcote Kmart store is due to close its doors in November this year as Wesfarmers, like many other retailers, rationalises its network and weeds out poor performing stores.
Despite negative sentiment, neighbourhood centres anchored by non-discretionary retailers were performing well, CBRE’s Mark Wizel said.
The attraction for investors was a heavy weighting towards supermarket share of GLA and relative insulation from the threat of e-commerce, he said.
In May, the owner of a Coles-anchored neighbourhood centre in Coburg North flipped their site after just 2.5 years for a tidy $10 million profit.
The Coburg North Village on the corner of Gaffney and Sussex streets in Melbourne’s inner north is understood to have sold for about $48 million, netting a yield around 4.72 per cent.
Stockland’s Tooronga Village centre recently transacted for above $62 million to Newmark Capital and Aurora Village in Epping, with Coles and Aldi key tenants, sold on a 5.76 per cent yield for $44.5 million.
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