Charter Hall Retail REIT sells five east coast investments – three to Lascorp

Charter Hall sold Kyneton Shopping Centre to Lascorp for $22.85 million.

Melbourne-based specialist retail investor and developer Lascorp is paying Charter Hall Retail Management Limited, as responsible entity for Charter Hall Retail REIT (CQR), $62.35 million for three regional Victorian supermarket-based assets.

The centres form part of a portfolio of five properties CQR has just sold off-market to fund the recent $840 million purchase of a 49 per cent stake in 225 BP service stations.

Charter Hall is also banking $39 million offloading the Erindale Shopping Centre in the ACT.

Coles Moe sold to Lascorp too, for $21.1 million.

Another retail asset, in Cooma, New South Wales, is trading for about $15.7 million.

Next year CQR intends to sell non-core assets worth another $100 million “in an orderly divestment program to maintain portfolio gearing in the middle of the target 30-40 per cent range”.

Lascorp buys three CQR Victorian supermarket investments

The Victorian supermarkets marketed by CBRE’s Mark Wizel and Justin Dowers include:

  • Coles Bairnsdale, which traded for $18.4 million on a 5.45 per cent yield;
  • Coles Moe, which exchanged for $21.1 million on a 5.7 per cent yield, and
  • Kyneton Shopping Centre (pictured, right) – which includes four shops around a Woolworths supermarket. It is selling for $22.85 million reflecting a 5.5 per cent yield.

Lascorp executive chairman Michael Lasky said the assets offered exceptional growth potential.

“The transaction is in line with Lascorp’s evolved strategy to focus on more income producing investments,” the purchaser added.

“We have every bit of confidence in the supermarket and convenience retail market as a long-term defensive asset class.

“The assets acquired are…similar…being net lease supermarkets with a long history of strong performance,” Mr Lasky said.

There is also the opportunity for consistent future rental growth, he added.

Supermarkets the star of the retail sector this year

Mr Wizel said commercial property yields continue to attract buyers who are disappointed with the low returns on offer from bonds or cash.

Lascorp’s purchase of three passive retail assets “makes a very big statement about just how hard it is to find returns in the current market”.

The cash flow that stemming from the assets is a bonus, Mr Wizel said.

Earlier this month, the agency sold a Coles-leased asset in Mentone for $15.3 million – a deal which reflected a 3.4 per cent yield – the lowest since a Coles-anchored supermarket in Clayton sold in 2018 (on a 2.57 per cent return).

“As the year has progressed we have taken an increasing number of enquiries from both traditional retail investors and a group of investors newly attracted to this type of asset,” Mr Wizel said. “That includes regular equity market investors chasing yield and security, and those who are attracted to the potential development upside”.

Yields for standalone supermarkets had softened over 2019, the executive said: this year they are circling 5.5 per cent, whereas last year, the average was 4.5 per cent.

The tightest yield for a Victorian supermarket was noted when Coles Clayton traded for $17 million.

The previous record – Woolworths Middle Brighton – was 3.8 per cent, set in 2016 (this investment sold for $32 million).

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco