'First-time entrant': Offshore buyer lands regional Coles, ALDI deal
An offshore Chinese investor has made its first major move into Australia’s shopping centre market with the $38.88 million purchase of a regional Victorian Coles and ALDI-anchored hub in Kilmore, at a sharp 5.06 per cent yield as demand intensifies for supermarket-backed investments.
Located about 60 kilometres north of Melbourne’s CBD, the multi-income-streamed asset was sold by private equity and venture capital group Looop following a competitive expressions-of-interest campaign managed by Stonebridge Property Group’s Kevin Tong and Justin Dowers.
It reflects an estimated fully leased net operating income of $1.96 million per year.
“While the quantum is below that of typical neighbourhood centre transactions in today’s market, the final yield of 5.06 per cent is a compelling indicator of current investor sentiment within the convenience retail sector,” says Dowers.
“Supermarket-anchored neighbourhood centres continue to outperform, supported by resilient income profiles, long lease structures and exposure to non-discretionary spending, with transaction volumes increasing 62 per cent year-on-year to the March quarter.”
Tong says the deal was struck following an extended period of agent-buyer discussion with the offshore buyers.
“The purchaser is a first-time entrant into the shopping centre market; however, this outcome reflects more than six years of engagement, education and relationship building,” says Tong.
“This transaction continues the strong momentum we are seeing from Asian capital into Australian retail.”
The investment sits on a 1.86-hectare Commercial 1-zoned corner parcel with dual frontage to the busy Northern Highway and Clarke Street, next door to Kilmore Village, positioning it within a high-growth corridor in Mitchell Shire, with further retail development potential on vacant land opposite the site.
The property draws about 69 per cent of its gross income from its dual-supermarket set-up, complemented by national and blue-chip tenants including McDonald’s, Viva Energy, Amplifon and Bakers Delight.
Configured across a highly efficient 5264 square metres of gross lettable space, the asset includes 248 on-title car spaces and a low-complexity layout comprising free-standing buildings and pad sites, limiting ongoing landlord management requirements.
Long lease structures underpin the income profile, reinforcing its defensive appeal and providing visibility over future cash flow. Coles is locked into a 10-year lease with two further 10-year options, with ALDI on a 20-year lease with an extra 10-year option.
“While Kilmore is a regional location, the strength of the underlying tenant covenants in Coles and ALDI was a key driver of purchaser interest, consistent with broader trends we are observing across the supermarket sector,” Tong says.
The result comes amid a broader surge in offshore capital targeting Australian retail, highlighted by Forest Endeavour’s $346.5 million acquisition of the Paradise Centre and Novotel Surfers Paradise, alongside a $500 million 10-supermarket Woolworths portfolio. Bendigo’s Lansell Square was also sold to a private Asia-based investor for $110.1 million.
“We are also seeing that many offshore Asian buyers are less impacted by rising interest rates, with the ability to transact with low leverage or on an all-cash basis. This provides a significant competitive advantage in tightly-contested campaigns and continues to support yield compression for high-quality assets,” Tong says.
Looop has held the asset for more than two decades, expanding it from a free-standing Coles by adding ALDI in 2016, enhancing both its scale and income profile over time.
Supply constraints are also sharpening competition for existing assets, with planning hurdles and elevated construction costs limiting new development.
“Assets of this nature are increasingly difficult to replicate, with construction costs and planning constraints materially limiting new supply,” Dowers says.
Mitchell Shire is forecast to accommodate more than 170,000 additional residents by 2046, positioning the asset to benefit from continued population growth across Melbourne’s northern corridor, with Broadstead Estate delivering 500 new homes alongside Montana Estate with 450 new abodes.
