Wednesday, February 28, 2024

Geelong West shopping centre sets benchmark yield in sale

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Pakington Strand shopping centre at 95-103 Pakington St, Geelong West, has sold.

Pakington Strand shopping centre in Geelong West has been sold as a high net-worth Melbourne private investor seized on the strong performing retail complex.

The 5317sq m centre realised a sub-5.5 per cent yield in the sale, setting a benchmark for the neighbourhood shopping sector, which has proved the most resilient to the cost of living crisis.

The sale was managed by Colliers’ Tim McIntosh and James Wilson in conjunction with Stonebridge’s Kevin Tong and Justin Dowers on behalf of APH Holding, which acquired the centre in 2016.

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The undisclosed price was well in excess of $30m, Mr McIntosh said.

Central to the complex on Geelong West’s Pakington St retail strip is the full-line Woolworths supermarket, which is paying percentage rent and is supported by 13 specialty tenants on a 2.1ha mixed use site with 307 car spaces.

A long weighted average lease expiry (WALE) of 12.4 years and a fully leased net annual income of about $1.7m at the time of sale underpins the investment.

Pakington Strand shopping centre at 95-103 Pakington St, Geelong West, has sold.

APH Holding leaves Pakington Strand with a full board of tenants, such as Subway, Brumby’s, Zambrero and Browtastic Beauty.

The Melbourne investment firm will turn its focus to its City Park retail masterplan in Melbourne’s east, with the first stage starting construction later this year.

Colliers’ director Tim McIntosh said the benchmark result and depth of interest from private and offshore investors, listed and unlisted groups as well as developers reinforces the resilient demand for well credentialed Victorian neighbourhood shopping centres.

“The centre was unconditionally sold to a high net worth private investor on a yield below 5.50 per cent shortly after a two-round process at the end of the campaign,” he said.

APH Holding has relinquished the Woolworths-anchored centre after eight years.

“It’s a really strong trading centre. I think everyone recognised Geelong West as a really thriving location and quite an affluent demographic.

“And longer term you do have that ability with the mixed use land to reposition it as well.”

Pakington Strand does provide a potential development upside through the mixed use zoning, though an original part of the former ropeworks building is protected under an heritage listing.

Mr McIntosh said it was the best yield for a neighbourhood shopping centre sold in 2023.

“I think the neighbourhood shopping centre as a sector has probably been to have to be one of the most resilient in the past couple of years,” he said.

The neighbourhood shopping centre’s mix of daily needs retail delivered an annual rental income of $1.7m at the time of sale.

“That’s because you’ve got such a high weighting to national supermarket covenants and daily needs shopping means that irrespective of cost of living, we all still go to the supermarket.”

The campaign representing the fifth neighbourhood shopping to be brought to market in Victoria last year, 40 per cent below the 10-year trend, and generated more than 300 inquiries across both agencies with a dozen offers received.

Stonebridge partner Kevin Tong said there continues to be a strong depth of buyer interest from local and offshore investors for investments after a lean selection of opportunities on market in 2023.

“Although the purchaser was based in Victoria, we witnessed strong competition from offshore investors with multiple groups forming our underbidders.”

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