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Four supermarket sales dominate retail property market

Four Progressive properties on the market will help supermarket sales continue to dominate the retail sector in New Zealand.

Colliers is handling Countdown supermarkets in New Plymouth, Pukekohe, Te Awamatu and Tokoroa for sale and leaseback by private treaty.

Agent Tim Lichtenstein says the properties can be bought together or separately but it is likely they will be sold separately because of the geographical spreads.

He says supermarkets sold last year in Huntly and Levin for $8.3 million and $9.38 million respectively, at roughly 8% yields.

“I don’t think these are going to be any different, except geographically Pukekohe will be in higher demand than Tokoroa.

"There will be variation. We won’t see them all sell at 8% but we should see them falling between 8-8.5% yields,” he says.

The four stores have combined annual rental income of $4.7 million, the individual rental incomes range from $659,000 to $1.68 million.

If the properties sold as a portfolio at 8.5% gross yield they would be worth $55.3 million.

Once sold, all four properties will be leased back to Progressive on 15-year leases with rights of renewal. 

Jones Lang LaSalle data shows supermarket sales, by value, made up 45% of retail transactions of more than $5 million, across New Zealand.

JLL’s research and consulting associate director Chris Dibble says in the $5 million plus retail band, $458.5 million of property was sold last year, $207 million of it associated with supermarkets.

There were 42 transactions in the $5 million-plus band and 25, or 60%, of those were supermarket sales, Mr Dibble says.

“Typically, investment yields for these properties have transacted between 7% and 9%, depending on location and asset quality."

“Listed trusts and syndicates dominate the purchaser profiles because supermarkets typically have a long weighted average lease term and the stability is attractive to these types of funds," he says.

Last year, Bayleys sold three supermarkets in a portfolio to NZX listed DNZ Property Fund for $40.73 million, the three having a combined rental income of $3.46 million and sold with a 8.5% gross yield.  

More by Conor O'Brien

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Trev's got his cheque book out....