Prosper Group client secures a prime neighbourhood centre plus DA for further upside
Purchase price:
$8,300,000
Asking Price:
$8,540,000
Replacement Value
$9,600,000
Negotiated Discount:
$240,000
Net Passing Yield:
8.3% (8.75% fully leased)
Property Age:
6 years
THE OPPORTUNITY
The centre was bought on a passing net yield of 8.3%.
It was also purchased below replacement value.
The centre is anchored by Bi Lo and has 16 specialty shops, two of which were vacant. There is a medical centre on the site which is in a separate building just off the retail centre.
The vacancies provided the potential for short term up lift in value through leasing the vacant shops.The centre also has long term add value potential through a DA approval for 3 extra shops and allowance for future extension of the Bi Lo trading area.
The vendor had spent considerable capital on both buildings to establish the centre as the main focal point of the surrounding master planned estate. The replacement cost of the property is $9,600,000.
The 3000 lot master planned estate surrounding the centre has over 70% yet to be completed. Once completed the increase in local population would be 300% x the current population. This population increase is predicted to occur over the next 5 to 10 years.
The increase in population may provide a significant uplift in the turnover figures of the centre and its value.
OUR STRATEGY?
The vendor is an experienced and well known residential developer and is developing the master planned residential estate which surrounds the centre. As with all large master planned estates, there was a need for a shopping centre and related stores to service the needs of the surrounding community. Being focused on residential developing and not on holding property investments long term, once the centre was completed and operational they were looking to sell it.
The property was offered via an expression of interest campaign which attracted keen interest from many prospective buyers.
In this market the vendor’s propriety was to deal with a buyer that they knew would complete the transaction and in the shortest time possible.
Not wanting to pay well in excess of the other bidders to secure the property, we instead offered sharp terms which we thought would be attractive to the vendor.
Confident of our refined process for analysing retails centres, on behalf of our client, Prosper Group offered a 30 day settlement which included only 14 days for due diligence. This offer was accepted.
A HAPPY CLIENT
Our client is an experienced retail property owner and had a particular criterion to buy a retail centre. Our client is delighted that he has purchased a retail centres that provides:
- A passing net yield of 8.3% with short term scope to lift this to close to 9% net.
- A new property offering a massive amount of depreciation.
- Long term add value potential via building the extra shops and leasing them.
- A catchment area that is projected to triple over the next 10 years.
Since taking on the management for the centre we have decreased the outgoings by 30%, by appointing a new cleaning contractor and re-tendering all the service contracts. We are also in the process of reconfiguring the existing tenants which will help draw more people to the centre.
For more information about how Prosper Group commercial buyers agents can assist you source a quality retail property please call us on 1300 664 373 or email enquiries@prospergroup.com.au
