Non-Discretionary
Supermarkets
Still in Demand
from Domestic and International Investors

CBRE Victorian Freestanding Retail Investments have transacted through auction the Supa IGA Supermarket in Ringwood East. Owned and run by the Corcoris family, the IGA supermarket was offered with a leaseback with a 10 year lease. The supermarket sold under the hammer for $7,340,000 on a yield of 5.4%, with multiple bidders bidding at auction.

The CBRE Team Lewis Tong, Kevin Tong and Leon Ma brokered the deal, saying there was a clear demand in the market for good quality income producing assets in 2019.

“The supermarket was a suitable asset for both domestic and international investors, given the long lease tenure and the commercial land parcel being opposite the Ringwood East Train station.” Commented Mr. Lewis Tong

The Corcoris family had been running the supermarket since the 70’s and has really become part of the community in Ringwood East service a lot of the locals in the area.The supermarket was spread across 2,100sqm commercial 1 zoned land, with a 10 year net lease with a net income of approximately $400,000 per annum.

There is still confidence in the buyer market especially for fundamentally sound blue-chip commercial property investments. In the case of the IGA Supermarket in

Ringwood East there were 3 key aspects which drew interest from buyers being the lease term, the positioning and underlying land holding

Kevin Tong added “If you compare returns investors are getting on other investments in the market, it is clear to see why commercial property is still in demand. Taking the 10 year Bond rate as an example, there has always been a positive spread, and with forecast for further compression currents yields for supermarkets still seem attractive.

The property sold to an International Asian investor providing more confidence there is still capital from China seeking good quality and blue chip investments.

“The ultimate purchaser had historically only been in residential developments, however they wanted to begin diversifying into more income producing investments and IGA Ringwood east ticked the boxes for the family.”

MELBOURNE CHINATOWN’S

SHARK FIN HOUSE

Sold to MALAYSIAN-BASED INVESTOR
The famous Shark Fin House at 131-135 Little Bourke Street,
Melbourne has been sold to a Malaysian based investor
for $14,500,000, in a deal managed by CBRE City Sales and
Development Sites team of Julian White, Lewis Tong, Chao
Zhang and Leon Ma.

The famous Shark Fin House at 131-135 Little Bourke Street, Melbourne has been sold to a Malaysian based investor for $14,500,000, in a deal managed by CBRE City Sales and Development Sites team of Julian White, Lewis Tong, Chao Zhang and Leon Ma.

The sale, to a first time Malaysian investor for $14,500,000 of the strata titled building, represented a net yield of 3.58%. The vendor had recently negotiated a new 10-year lease in 2018 with the tenant. The length of tenure and Chinatown location were major appeals to the successful buyer. This showed a significant uplift in value from the last sale at $7,500,000 in 2012 of some 95%.

In a period in the Melbourne CBD Market that has shown a limited volume of transactions, the buyer, after an extensive negotiation, moved quickly to secure this property. “This is the only sale of the year thus far of a retail building in the $5 million to $20 million price bracket, meaning there is significant pent up interest for quality buildings for investors both locally and abroad, which we experienced first-hand in this process” said Mr Chao Zhang

In 2018, by 30 April 2018 a total of $65,225,000 over 7 deals had transacted of retail buildings in the Melbourne CBD between $5 million to $20 million. Over the samem period, in 2019, the sale of Shark Fin House is the only transaction in this price bracket, highlighting the lack of supply and unmet demand for this asset class.

Please see below graph representing this position:

The buyer of the property was a Malaysian based investor making one of their first forays into the Australian property market.

Director of CBRE Asian Services Desk Mr Lewis Tong said “Melbourne has had a long-standing attraction to Malaysian investors with an affinity which dates back to the 1950s when many Malaysian overseas students came to Melbourne to study tertiary education. This purchaser saw Melbourne as a safe city to invest especially given the changes in the political environment in Malaysia. During the last 12 months circa 15% of our property transactions were to purchasers of Malaysian origin, and a further 40% from other parts of Asia”.