Melbourne Coles sells on year’s tightest yield

The rare chance to score a standalone supermarket has seen a Victorian Coles sell on the state’s tightest supermarket yield of 2019.

The Coles at Mentone in bayside Melbourne was sold to a Chinese investor for $15.3 million in a hotly contested auction that ended with a yield of just 3.4% – the lowest in Victoria 20 months.

The previous lowest yield was for the Coles at Clayton, which sold on a 2.57% yield in March 2018.

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CBRE agents say the buyer was so captured by the property that they flew in from China specifically to view it and attend the auction.

“Standalone supermarkets are standout performers in pretty much any market. When you add a 10×10-year lease to Coles and long-term development upside, in a sought after bayside locale, the property is going to sell well,” Mark Wizel says.

“What has added to the mix in delivering 2019’s strongest result in this class is the fact that opportunities to buy these so-called recession-proof assets are so thin on the ground and that was absolutely underlined by the fact that we had two investors from mainland China fly in just for this auction.”

The supermarket at 81 Mentone Parade is leased to Coles on a 10-year lease from January 2017, with a further 10-year option, and currently returns $519,785 net per annum.

The internally refurbished property spans 2854sqm and has access to more than 150 at-grade car parking spaces.

The supermarket sits on a 2600sqm site with 106 metres of street frontage and sits opposite Mentone Reserve, within a short walk of Mentone railway station.

CBRE co-agent Justin Dowers says the supermarket’s potential for future development saw a boost in interest.

“More and more we are taking enquiries from prospective buyers with questions on zoning, site access and population growth forecasts,” Dowers says.

“The recognition of long-term, value-adding with metropolitan retail opportunities is the new black with what had been a relatively passive retail investor cohort, and it has swelled their ranks.”