Freestanding supermarkets leased to the major chains remain the most sought-after of commercial property assets, according to Burgess Rawson.
On December 12, the agency is not only offering three supermarkets at its Crown portfolio auction, but their leases have rare added features.
Also among the properties being offers at what will be Burgess Rawson’s 125th portfolio auction is a Bunnings Warehouse
A combined $50 million worth of assets will go under the hammer at the event.
One of the supermarkets up for grabs is a freestanding property leased by Coles in the thriving Western District town of Hamilton.
Having opened in 2015, the property’s net lease, for which Coles pays all the outgoings, runs through to 2035, with options for two 10-year terms through to 2055.
Base rent is $1.19 million and this is projected to rise to $1.23 million next year.
The tenant is forecast to pay the landlord a percentage of gross sales in addition to the rent as early as this lease year.
“This asset has been a high performer since relocating from a smaller building and is only 0.19 per cent off its turnover threshold,” said Burgess Rawson director Shaun Venables.
Another supermarket being auctioned is Woolworths in Kyabram, near Shepparton in northern Victoria.
“This supermarket is a trophy asset and the largest in the region, following a redevelopment and extension in 2014,” Mr Venables said.
“It provides a 20-year lease to Woolworths until 2034, with options to 2079.
“After the upgrade, it experienced huge sales growth with turnover figures for the three months up to October (compared with last year) exceeding 8 per cent.”
The 3,334 sqm supermarket comes with a stand-alone BWS outlet under the one lease, and Woolworths also pays the amount by which the property’s overheads rise each year.
The landlord’s income is based on $1.14 million in rent, plus turnover rent and any increases in outgoings.
A third supermarket, a Ritchies IGA, in the all-year-round tourist destination of Bright, will also go to auction.
“This long-established supermarket is backed by ASX-listed Metcash and features a secure 10-year lease to 2025, with a further two 10-year options to 2045,” Mr Venables said.
“Ritchies, which achieved over $1 billion in sales last year, acquired the IGA from its previous operator in 2015.
“The 1,600 sqm supermarket includes a liquor department and continues to go from strength to strength.”
Rent is projected to reach $243,432 a year following its October CPI rent review.
Situated in the Hobart suburb of Glenorchy in Tasmania, the 16,900 sqm Bunnings site to be offered at the portfolio auction will be a hotly contested asset, Mr Venables believes.
Bunnings commenced trading on the significant 38,310 sqm landholding in 2015.
The rare 25-year triple net lease runs to 2040 with a 25-year option to follow.
It has annual fixed 3% increases through to 2040.
“These prime assets, which are secured by standout landlord-friendly leases to Australia’s largest retailers, are rarely offered to the investor market.
“Grocery and hardware stores provide essential services, and regardless of what is happening in the economy, these businesses continue to thrive.
“Supermarkets have lease structures in place that allow a landlord to obtain a share in gross sales in addition to rent, which is effectively making them a partner in the business,” he said.
The public auction will take place on Wednesday, December 12 from 11am in the River Room of Crown Casino in Southbank.
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Written by Olga Galacho for the Herald Sun