Suburban Coles sold as more private investors chase supermarkets

Freestanding suburban supermarkets are highly prized by investors. Picture:
Freestanding suburban supermarkets are highly prized by investors. Picture:

A group of Melbourne investors has paid $13.77 million for a suburban Coles, as more private investors target pandemic-proof supermarkets.

The private investors, who were backed by Vietnamese capital, beat aggressive bids for Coles Lalor in Melbourne’s north from high-net-worth individuals moving into commercial property.

The 2783sqm site sold for $13,768,888, representing a sharp 2.98% yield, selling agents Stonebridge Property Group said.

A family had owned the Lalor supermarket, which sits on 3365sqm of commercial 1 zoned land, for more than 30 years.

Exterior view of the Coles Lalor supermarket in Melbourne

Melbourne-based private investors paid $13.77 million for the freestanding supermarket. Picture:

Stonebridge Asia Practice partner Kevin Tong said all 11 offers for the supermarket came from private investors.

“The most aggressive buyers that were identified when the bids were received represented high-net-worth individuals that were not necessarily common industry players,” Mr Tong said.

“These buyers were individuals that had ongoing business interests outside of property and an increased appetite to shift a growing wealth pool [due to business profits] into a secure investment like Coles Lalor.”

Retail investors are increasingly targeting assets tenanted by essential and non-discretionary retailers, with a growing pool of buyers looking for defensive, income-producing investments that have proven to be pandemic proof.

Coles Lalor includes a Liquorland and is leased to Coles on a 10-year term plus further options.

Stonebridge partner Justin Dowers said the sale shows investors are seeing more value to freestanding supermarkets than just a pure income investment.

“Metropolitan Melbourne freestanding supermarkets sit on some of the most strategic and valuable land parcels in Melbourne, which is a factor that we are now seeing consistently priced in,” Mr Dowers said.

Coles Lalor was purchased by a Melbourne-based group of private investors with Asian heritage.

Mr Tong said demand from Asian investors, particularly for blue chip investments, has continued to grow since Australia’s international borders reopened in February.

Demand has come from investors in China and other parts of Asia including Hong Kong, Singapore and Vietnam, he said.

“The eventual purchaser was a group of private investors with capital sources coming out of Vietnam, who was attracted to the long-term income security of Coles and the upside potential,” Mr Tong said.

View of Coles Lalor supermarket from across the street

Dozens of groups of investors looked at buying Coles Lalor. Picture:

Stonebridge partner Rorey James added 66 groups requested due diligence information during the Coles Lalor campaign, showing the depth in the market from buyers looking for securely-leased blue chip investments, particularly those with land and future upside.

Coles Lalor represented the second major supermarket sales campaign in Victoria this yearAnother standalone Melbourne supermarket, the 3744sqm Woolworths Eltham, was sold by Stonebridge and Fitzroys agents in early April for $35 million on a 3.3% yield.

Stonebridge said the 2.98% yield for Coles Lalor represented a benchmark yield for freestanding supermarkets nationally, in terms of a traditional standalone supermarket without future development potential priced into the deal.