Sentinel Property Group has sold City West Plaza in Melbourne’s west to Cadence Property Group and Assembly Funds Management, the latter an entity part-financially backed by Sydney-based Westfield co-founders, the Lowy family.
The transaction, the biggest for a Victorian retail property this calendar year, was completed through the COVID-19 period which the broker said “is a positive sign for the market” and highlighted “strong investor support for assets with sound…property fundamentals”.
Struck on a 5.26 per cent initial yield or 7.15pc on a fully let market basis, City West Plaza will be held by Assembly’s recently launched first fund, ADPFI, and managed by Cadence Property Group.
City West Plaza and Sunshine
On 6.1 hectares at the north west corner of McIntyre Road and with 803 car parks, City West Plaza includes four buildings containing a total of 24,885 square metres of retail space rented to 13 businesses.
Harvey Norman occupies about 30pc of the area and contributes to 41pc of the annual income. It can exercise the first of three five year renewal options when its lease expires in October, 2022.
Furniture Galore, KFC and beds and dreams are amongst the other tenants – but the complex has a 19.6pc vacancy. The weighted average lease expiry is a low 2.15 years.
About 70,000 vehicles a day pass the property, on a major road thoroughfare, 12 kilometres from the city.
Like many former working class suburbs in this part of Melbourne, Sunshine North is being gentrified and high density apartment projects are replacing commercial sites.
A planning scheme amendment affecting 484-486 Ballarat Road, which is adjacent to the Albion train station, would allow for a mixed-use redevelopment topped with nine storey buildings.
The neighbouring Sunshine, across the road to the south and being classified as a major activity centre, is earmarked for even taller structures.
Sentinel rides a capital value wave, while Assembly will value-add
City West Plaza was Brisbane-based Sentinel’s only Victorian investment.
It paid $29.5m in 2015, then held it with assets in Western Australia’s Geraldton and New South Wales’ Nowra, in its open-ended c$350m Sentinel Homemaker Trust – which had a May, 2020 distribution of 9.5pc.
The sale price translates to a land rate per sqm of $1759.
Assembly, founded in August, 2019, by Michael Gutman OBE, former board director, president and global chief operating officer of Westfield Corporation, is a Sydney based stapled entity with the financial backing of, amongst others, Sir Frank Lowy, his sons, David, Peter and Steven, and private equity firm, Alceon.
The purchaser will now partner with Charlie Buxton’s Cadence – which is headquartered in Melbourne – to renovate the Sunshine North investment.
Several development outcomes for City West Plaza
The shopping centre structure covers just 38pc of the site – a parcel zoned to encourage intensive mixed-use development, according to Mr Taylor.
“City West Plaza’s significant land holding provides an excellent opportunity to continue to enhance the existing retail offering and to progressively refurbish or redevelop the complex,” the agent added.
“The sale…confirms the ability to achieve strong pricing outcomes for well-located retail assets, especially those that have the potential for capital investment or further development.
“Investors continue to be attracted to retail assets in metropolitan locations given the sector generally offers land-rich sites with low…coverage, providing owners with an ability to drive further value”.
The executive said the agency is working with a number of new entrant or non-traditional retail buyers.