Weekly Wrap

Fitzroys Weekly Wrap - 24th February 2023

Posted on 24th February 2023

Shop 1, 1 Post Office Place, Glenroy
A local private investor bought the corner strata property, leased to a medical tenant, for $3 million on a 3.47% yield.

6 Smith Street, Collingwood

The double-storey 215sqm building leased to medical operator Fertile Ground Health Group sold for $1.935 million, on a 4.9% yield.

681 Nepean Highway, Brighton

At the corner of Centre Road, the 2,282sqm building occupied by the Good Guys on a long-term lease sold to a local investor for $15.6 million. It returns $733,133pa.

1020 Burwood Highway, Ferntree Gully

The 1,054sqm showroom and warehouse building, occupied by Garry & Warren Smith Mazda service centre, sold for $3.38 million on a 5.04% yield. It has a renewed 5+5-year lease that returns $170,187pa plus GST.

12/1 Hunt Way, Pakenham

The new 551sqm showroom sold for $2.585 million on a 6.60% yield. Snap Fitness occupies the premises on a new 10-year lease plus options, returning $170,500pa plus GST.

130 Montague Street, South Melbourne

An owner-occupier paid $1.37 million for the vacant 2-level 150sqm building, which is on a 150sqm corner site with 3 frontages. It can return up to 3 income streams.

539 Warrigal Road, Ashwood

An owner-occupier bought the 100sqm shop on a 210sqm site for $750,000.

537 High Street, Preston

Preston Physiotherapy leased the 410sqm property at $100,000pa.

6 Craine Street, South Melbourne
A local investor paid $2.35 million for the vacant 150sqm building on 166sqm of land.

2/13 Willow Avenue, Springvale

The 174sqm space sold off-the-plan for $1.08 million, on a 5.22% yield. It has a pre-lease to accounting firm Numbergroup of 3+3+3-years returning $56,582pa.

12 Smith Street, Collingwood

Video editing company The Editors signed a 5-year lease at $170,000 as it consolidates its Melbourne sites.

181 Oherns Road, Epping
A local developer bought the permit-approved 4,926sqm site for $5.14 million. It has approval for 11 warehouse units ranging from 161-383sqm.

6-6a Lawn Court, Craigieburn

A private buyer paid $1.82 million for the 683sqm building, which comprises 1 tenanted warehouse and a vacant warehouse.

363-369 Warrigal Road, Cheltenham

AZAU Global Pty Ltd leased the 2,800sqm refurbished office, showroom and warehouse at $266,000pa.

1080 Burke Road, Balwyn North
A New South Wales-based investment group paid $3.01 million for the 939sqm site, which has a permit for 11 apartments.

58 Patterson Road, Bentleigh
King Kids signed a 15-year lease over the 869sqm facility, which has approval for 124 long daycare places, at $539,400pa.

High-Yielding Countercyclical Opportunity with Enormous Future Potential
Vendors are currently willing to sell assets at higher yields, offering investors fantastic opportunities to make countercyclical plays and lock in strong returns that will outpace inflation over the medium to long-term.

Among the best opportunities currently available is a low-risk, high-yielding investment with a long WALE to a national tenant, 446 Maroondah Highway in Lilydale. Fitzroys Director Paul Burns and Division Director - Agency, Chris James are marketing the asset, which is priced to sell on a circa 5.5% net yield.

Burns said the Reserve Bank Governor and Treasurer’s stated a target inflation rate of 2% to 3% in the early 1990s, and Australia has generally been within this band since.

“The current level of inflation is not expected to persist long-term. Assets purchased now, at historically high yields, will prove to be very prudent investments,” he said.

“It’s a great time to start looking at buying property when vendors are selling at higher yields.

“This is an excellent countercyclical opportunity that will be cash positive relative to the cost of money once the rate of inflation eases and interest rates normalise.”

Inflation is broadly expected to soften throughout 2023 and further into 2024. The Reserve Bank is forecasting inflation to come back to 4.75% by the end of 2023 and 3.25% by the end of next year, while major lenders and many economists share a similar view.

The large, elevated corner site at 446 Maroondah Hwy is 6,229sqm, zoned Commercial 2, comprises a two-level 2,412sqm fully-leased building plus a very generous carpark allocation (100 bays) and 100 meters of street frontage. It is being offered with a brand-new 10+5+5-year lease to national company Belgravia Health & Leisure, accounting for 96% of the income.

Belgravia, which has 170 sites across Australia and New Zealand will operate three business on site - a Genesis Fitness Centre, Jump Swim School and Pursuit martial arts school.
Lilydale Hair Co occupies the balance of the property (85sqm) on a new 7-year lease.

The building has undergone a $3 million renovation and returns $532,000pa net. It has a Weighted Average Lease Expiry (WALE) of almost 10 years.

Burns said that as well as representing a low-risk, high-yielding investment with a long WALE, the property offered outstanding tax benefits and enormous future potential, being on a significant land parcel positioned in a high-growth area.

He said there is a significant surplus of tenant demand from name brands such as Hungry Jacks, Kia, MG and Total Tools.

“These and other tenants are looking for representation in Maroondah Highway, Lilydale, however, there are no vacancies. This will inevitably result in ongoing rental growth as tenants outbid one another for the rare alternatives that arise.”

“The newly undertaken significant building upgrade at the property avoids the need for much or any capital expenditure, as well as providing outstanding tax depreciation benefits.”

Burns also noted that while the property is fully-leased long-term, it is significantly underdeveloped, with the entirety of the income derived from a site coverage of just 27%.

“This is one of the best land bank propositions in an area that’s earmarked for a period of rapid growth. Investors will be able to enjoy a secure income stream from a recognised tenant while assessing the value-add and development options encouraged by its location within a Major Activity Structure Plan.”

The property’s future development and value-add potential is boosted by the Lilydale Major Activity Structure Plan (2019), which encourages higher density uses in the precinct. The property is located within the Plan area, which will see demand for an additional 10,000sqm of retail floorspace and 11,000sqm of commercial floorspace over the next 15 years.

The property is next to Toyota and is surrounded by other major automotive dealers and large format retailers such as Holden, Sangyong, Suzuki, Pedders, Supercheap Auto, Repco, MycarTyre & Auto, McDonald’s, KFC and Ampol. Burns said Lilydale has become an important commercial centre in its own right, and is the gateway to the famous Yarra Valley food and wine region, one of Victoria’s premier tourist destinations and which is experiencing significant growth.

Epping Retail Centre Sells for more than $70m
Property investment group Forza Capital and Jayland have acquired a large format retail centre and adjoining land in Epping for $70.25 million, from ASX-listed HomeCo Daily Needs REIT.

The total offering encompasses 9.124ha of land. Epping Hub, on a 7.48ha site, comprises 30 tenancies across 22,038sqm of building area. Occupants include Officeworks, Supercheap Auto, Cash Converters, Centrelink, Chemist Warehouse and Harvey Norman, for a WALE of 1.7 years.

Disclosure: The weekly Fitzroys Property Wrap is for information only on transactions in the Melbourne property market. Fitzroys provides this information as a public service. We are not purporting that all sales and leases within this report were transacted by Fitzroys. Terms/Privacy © Copyright 2023 Fitzroys.