Strata-Titled Assets In The Spotlight

Posted on 15th December 2020

The attraction of secure, income-producing Melbourne commercial property investments has strengthened throughout the COVID period, with a trio of strata retail assets snapped up by self-managed super fund investors and retirees as the city emerged from lockdown.

Fitzroys’ Chris Kombi and Lewis Waddell sold three individual strata-titled retail properties within Lendlease’s Aurora Village to separate investors, at an average 5.4% yield.

The three shops sold for a combined $2,700,000, with long, secure leases in place with fixed annual rental increases:

- 311 Harvest Home Road - leased to 100% Real Estate on a 5+5+5-year term

- 313 Harvest Home Road - New Star Nails, with a 7+7-year lease

- 315 Harvest Home Road - Cuts 4 All, with a 5+5+5-year lease

“Investors are increasingly looking for assets with secure income. The Reserve Bank has cut interest rates further to a new historical low, while the share market still presents volatility,” Kombi said.

“Strata-titled commercial property assets present ideal set-and-forget investments for SMSF investors and retirees.

“We expect to see demand from this segment of the market continue to grow in this environment.”

He said strata-titled property offers an easier management proposition, with an owners corporation overseeing maintenance, while low land tax liabilities don’t cut into the return. The Aurora Village properties are recently-constructed, offering strong tax depreciation benefits.

He said the 5% to 5.5% return from commercial strata-titled investments continues to be the difference between retirees earning, for example, $50,000-$55,000 per annum from a one million dollar investment, compared to interest of $10,000 from equivalent funds in a savings account.

“Over the past 12 months we’ve seen a rush from investors looking to shore up their income stream. Often, it’s been retirees in their 60s wanting to buy a property that will immediately improve their income, or it’s SMSF investors in their 50s preparing for their retirement.”

Kombi and Waddell have now sold 11 strata-titled retail assets at Aurora Village since July, during the COVID period, with the combined sales figure across the deals is $9.6 million.

Assets have been sold with leases to food and beverage, services and medical tenants, including Harvest Pizza and Pasta, Aurora Butchers, Bottlemart, Aurora Groceries, Suburban Grill, Oregano’s Bakehouse & Café, Aurora Laundry, and Dr Skin Laser & Cosmetic Clinic.

Waddell said well-located properties in high growth areas continue to be highly sought-after.

“Aurora Village is located in the heart of Melbourne’s northern growth corridor, anchored by high-performing Coles and Aldi supermarkets, and is home to multiple national and popular local tenants,” he said.

Among these tenants are Anytime Fitness, Liquorland, Coles Express, Select Pharmacy, Degani, TGS, Tatts and Epping Medical Centre.

The shopping centre is strategically positioned on a highly exposed corner site and close to new residential estates in various stages of completion. Aurora is forecast to house approximately 25,000 residents.

“These elements further underpin the area’s trade prospects and the security of the leases,” he said.