Eastern suburb supermarket fetches $29.3m

A Woolworths backed supermarket at Balwyn was recently listed for sale after 28 years.

A supermarket in the heart of a Blackburn South retail strip has sold for $29.3 million reflecting a 2.46 per cent return – the second lowest yield for an Australian asset of this type.

Westrent Properties’ Emmanuel Zahra is the buyer.

The vendor, the Kluger family, paid $417,000 in 1977.

The Balwyn property (outlined) is expected to sell for more than $35 million at auction on November 12.

Leiba Commercial’s Marc Leiba and Jonathan Rosenthal brokered the off-market sale.

Their deal comes hot on the heels of another eastern suburb supermarket investment trading for c$25m at a record sub two per cent yield.

Meanwhile, the vendor of 383 Whitehorse Road, Balwyn, a freestanding Woolworths on a 4700 square metre Commercial 1 zoned block, is also likely to reap the benefits of this strong market after 28 years of ownership – the November 12 auction expected to deliver a $35m-plus price.

Vinci Carbone is marketing that property – expected to be one of the state’s biggest street auctions results.

Blackburn South Woolworths

On 7298 sqm at 117-125 Canterbury Rd, the Blackburn South asset (pictured, top) includes 145 car parks.

The freestanding building contains 3495 sqm of area.

The long-standing tenant is on a lease expiring in 2030 with options.

Mr Leiba said the off-market campaign generated significant interest.

“Woolworths and Coles backed supermarkets are considered the country’s most recession proof investments,” he added (story continues below).

“In or out of the COVID environment, we still need to get our groceries,” according to the executive.

“Buyers understand what the clean and passive covenants are worth and what they have to pay to get their hands on something these days”.

The current low interest rate environment, he added, is also driving demand.

Sub 4pc yield becoming the norm

The Blackburn South deal comes a day since we reported Woolworths’ development arm Fabcot banked $36m – a price reflecting a four pc yield – for a modern supermarket near Wollongong.

In August, Charter Hall outlaid $25.9m for an asset of this type in Sydney’s Five Dock, tenanted to Coles.

That sale was struck at a 4.29pc return.

In 2018, a consortium led by the fruit and vegetable trader Rocky Surace outlaid $17.115m – a 2.57pc yield – for a Clayton supermarket near to another property it held – a deal described by the buyer as a landbank moreso than an investment (the parcel has the potential to make way for a nine level apartment building).

Two years ago, an offshore investor outlaid $15.3m, a price reflecting a 3.4pc return, for a Coles backed Mentone asset of this type.

That property also has high density development upside should the occupier not renew its lease in 2027.

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Marc Pallisco

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