Gippsland Woolworths offers buyers rare ‘turnover rent’

The Woolworths supermarkets at Leongatha is set to be auctioned.
The Woolworths supermarkets at Leongatha is set to be auctioned.

A bustling regional supermarket with a guaranteed investment return locked in for almost a decade is set to go under the hammer. 

Woolworths at Leongatha, in Victoria’s South Gippsland, is expected to lure plenty of interest from eager investors keen to swoop in what is a market starved of similar stock.

Located at 1-7 Peart St, the 3143sqm store sits on a 3267sqm site that includes 142 car parks.

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The supermarket will be sold with nine years of a 20-year lease to Woolworths remaining at a current income of $699,000 a year.

CBRE’s Joseph Du Rieu, who is managing the sale with Mark Wizel and Justin Dowers, says the strongly performing supermarket is the first in more than two years to be offered with turnover rent in Victoria. Turnover rent means the landlord receives a percentage of the tenant’s turnover, on top of the base rent.

Only three supermarkets have been sold this year compared to six in 2018. The standalone sales include Coles at Lalor Plaza in Victoria for $7.38 million in June, while Woolworths in Lara sold for $21.1 million in May and Coles Drysdale for $22.5 million in January.

“None of those offered turnover rent and that is going to drive further interest is what is an increasingly hungry market for this type of product,” Du Rieu says.

The Woolworths at Leongatha.

He says there are a number of factors driving demand for supermarkets including the 100% non-discretionary spend tenancy profile, blue chip tenants, long leases, sites with strong underlying land value and future development potential.

“What is adding to that potent mix of investment credentials is the increasing competition for property over other, perhaps more volatile, asset classes,” he said.

“Those property assets, such as supermarkets, that are regarded as defensive investments, are attracting that much more attention.’’

Dowers says the lower value of the Australian dollar could attract interest from overseas.

“Off-shore investors have shown a greater degree of interest in retail assets of late and the fact that the Australian dollar is now at a point which provides those off-shore investors an additional level of incentive,” he said.

Du Rieu says the property also benefits from Leongatha’s status as the main town in the area.

Located in the South Gippsland Shire, its population is forecast to grow to 8038 by 2036.

The property will be auctioned at CBRE’s next Premium Portfolio Property Auction on Thursday, October 10.