A Brisbane fund manager has walked away with a 50 per cent gross capital gain in less than two years on a Gold Coast neighbourhood mall, bought from Stockland.
IJ Capital, led by Scott Lai, paid $40.1 million in March 2020 for Coles-anchored Benowa Gardens, 4 kilometres west of Surfers Paradise, and sold it after just two-and-a-half weeks on the market for $60.5 million to a Queensland private investment group.
The neighbourhood mall was held for less than two years before being sold.
Savills agent Peter Tyson said offers representing $700 million of available capital had been made for the 5856 sq m mall at 203 Ashmore Road, highlighting the appetite for convenience-based retail or “daily needs” assetsas they have become commonly known since the pandemic.
Reflecting this weight of capital seeking exposure to the asset class, this month’s acquisition of Benowa Gardens was struck on a yield – or return – of 5 per cent, down from 6.3 per cent when IJ Capital acquired it from Stockland in March 2020 for an unlisted property trust.
Since acquiring the mall, IJ Capital upgraded the centre including installing travelators and lifts, extended the lease to Coles (which in turn upgraded the supermarket) and adopted a proactive leasing strategy to reduce the number of vacant specialty shops from about a dozen to just four.
Alongside the Coles supermarket, Benowa Gardens has 37 specialty shops, a KFC drive-thru restaurant and parking for 384 cars.
“We recognised value-add opportunities with Benowa Gardens, consistent with the investment objectives of the fund,” said Mr Lai, who also founded eat now, pay later fintech Payo.
Highlighting market dynamics, which heavily favour vendors, unitholders in the IJ Property Trust No.1 elected to exit their investment in Benowa Gardens less than half-way into a five-year planned holding period.
“Convenience-based neighbourhood centres as an asset class remain incredibly popular in the market, attracting a wide range of capital sources,” said Mr Tyson.
He said the full spectrum of investor types had made offers on Benowa Gardens including listed property trusts, syndicates, wealthy private investors and offshore groups.
“[Neighbourhood mall] income streams are underwritten by staple everyday needs, predominately food and services and they have proven resilient and less prone to fluctuation from outside influences,” Mr Tyson said.
He said social distancing restrictions and the work from home trend had bolstered the performance of smaller malls.
The result achieved for Benowa Gardens was in line with recent deals including the Woolworths-anchored Fernvale Village shopping centre west of Brisbane, which sold to a private investor this month for $35.5 million on a 5.1 per cent yield.
Late last year, Moggill Village, a Coles-anchored neighbourhood centre in Brisbane’s western suburbs developed by Don O’Rourke’s Consolidated Properties Group was purchased by ASX-listed SCA Property Group for $54.5 million on a 5 per cent yield.
