RG Property sells The Village Dandenong off-market for $29.1m

Developed five years ago, The Village Dandenong is in Dandenong South, 35 kilometres south east of Melbourne.

A Chinese investor is paying $29.1 million for The Village Dandenong shopping centre, in Melbourne’s south east.

The off-market deal was brokered by JLL director, Retail Investments, Stuart Taylor and Ming Xuan Li, associate, on behalf of Perth-based RG Property.

The shopping centre sold on a low 5.19 per cent yield following an off-market deal.

The result reflects a low 5.19 per cent initial yield (it is six per cent vacant).

On a fully leased basis, the return is 5.96pc.

Dandenong, a major activity centre, is also one of Melbourne’s biggest industrial hubs.

The adjoining Dandenong South, the location of The Village Dandenong, is 35 kilometres from the city.

The Village Dandenong

RG Property constructed the single-storey retail investment five years ago at 81-125 Princes Highway, near the south west corner of South Gippsland Highway.

The 1.87 hectare site belonged to Cbus Property and once formed part of the former General Motors Holden plant.

With 5343 sqm of area, it is laid out with 15 specialty stores and a BWS liquor outlet.

Woolworths is the anchor occupier with a 3800 sqm full-line supermarket.

The centre’s weighted average lease expiry is 8.3 years.

The Village Dandenong has some development prospects, with a vacant tract of land to its west, the potential for basement car parking, and airspace.

It is opposite a former Masters outlet now occupied by Bunnings.

Deal sealed at sub-six per cent yield

Mr Taylor said five Victorian neighbourhood shopping centres have sold since January – with the total value being $118.93m.

The average return was 5.47pc.

“These assets are being viewed as an investment safe-haven in the current climate given they derive the majority of their income from essential service businesses such as Woolworths and Coles supermarkets,” the executive added.

“The neighbourhood shopping centre market has demonstrated liquidity in the first half of 2020 with pricing remaining firm.

“Transactions have been driven by the defensive nature of the income streams and the continued ability to access cheap debt”.

As well, the agent said, “supermarkets outperformed during the peak of the pandemic in March, with monthly retail trade growth of over 23pc.

“Despite the ABS preliminary retail trade figures for April falling by 17.9pc, food retailing figures remained higher than in April, 2019 (story continues below).

“The strong pricing achieved in this off-market [The Village Dandenong] transaction confirms the robust demand for non-discretionary retail assets”.

RG Property chief executive officer, Rhett Williams, added the sale price “reflects an excellent outcome for our investors” and “builds upon our track record of identifying value opportunities and executing on those strategies”.

In March it sold PGA Property a Brisbane CBD office at 410 Queen Street for $53.5m.

Woolworths’ recent supermarket sales a good guide to yields

While The Village Dandenong wasn’t sold by Woolworths, the supermarket group has offloaded plenty of modern, fully leased shopping centres over the past 12 months – and its deals are a good reference for yields.

Two weeks ago, it peddled the Spring Farm Shopping Centre in Sydney’s south west, for $34.75m on a 5.77pc return, to Primewest.

In April, a local investor paid the retail group $33.35m, reflecting a 5.4pc yield, for the newly opened Keysborough Shopping Centre on a 1.8ha site 27 kilometres south east of Melbourne.

Also that month, a freestanding outlet in Wadalba, on the New South Wales Central Coast, offered with a leaseback, traded for $26.15m – a 5.7pc return.

Last July Woolworths sold the Banksia Grove shopping centre in Perth’s north.

Based on that result ($27.3m), the yield was 5.96pc.

Rival Coles has also been an active seller of retail investments, often with a part or full leaseback.

Centres not owned by Woolies

Developers, private investors, syndicates and trusts have been active sellers of shopping centre stock recently, too.

Last month APN sold Coburg Hill Shopping Centre, 11kms north of Melbourne, for $21.3m.

Forming the ground floor of an apartment building – and therefore with no redevelopment prospects – the return for this deal was relatively high (6.6pc).

Harrington paid ISPT $26.5m – a 5.8pc return – for the Greenacre Shopping Centre in its hometown Sydney, six months ago.

Several nine-figure retail deals have been sealed, too, including last December when Scentre Group paid AMP Capital Diversified Property Fund $575m for a half-share, and management rights, of Garden City Shopping Centre in Perth’s Booragoon.

A month earlier, Lendlease managed Australian Prime Property Fund sold a 50pc stake in a complex: Adelaide Westfield Marion (that $670m transaction, to a Moelis Australia managed investment vehicle capitalised by Singapore’s SPH REIT Management, was the priciest for an Australian retail offering in 2019).

Last July, Mulpha spent $160m on the Brimbank Shopping Centre in Melbourne’s west Deer Park – a price which represented a 7.7pc yield with vendor, Blackstone.

Australian Unity also sold its co-owner, ISPT, the half share of the Waurn Ponds Shopping Centre near Geelong, for a speculated $140m-$150m.

That purchase included 7.6ha of land which could be considered for residential development.

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Marc Pallisco

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

Marc Pallisco