CVS Lane and CPG place South-East Queensland retail asset portfolio on market

CVS Lane and Consolidated Properties Group (CPG) have commenced a formal sales and marketing campaign for five of the neighbourhood shopping centres in their South-East Queensland portfolio.

The centres, which are all anchored by either Coles or Woolworths supermarkets, and in some instances both, are located in high growth areas across South-East QLD, namely, Karalee, Palm
Beach, Wilsonton, Springwood and Keperra.

The portfolio will be offered either in-one-line, or on a single asset basis, or any combination of assets. Each centre has recorded solid increases in valuation since acquisition, driven largely by substantial upgrade works undertaken by CVS Lane and CPG, with each offering further significant development potential.

A high proportion of daily needs, non-discretionary and essential service retail tenants across the portfolio has delivered consistently strong performances for each asset since acquisition, particularly during the recent pandemic. JLL and CBRE have been appointed as joint sales agents for the campaign, which is set to commence on July 28, 2022.

COMMENTS ATTRIBUTABLE TO LEE CENTRA – Chief Executive Officer, CVS Lane Capital Partners
Our strategy has always been to hold these assets for the medium to long term to deliver a strong and growing source of income for our investors.

With our original Trust approaching maturity and unprecedented high demand for this asset class, particularly in South-East Queensland, we have formed the view that there is now a good opportunity to test the market for a potential sale.

CVS Lane and CPG have received multiple unsolicited offers for the assets over the past 18 months, reflecting this unprecedented level of demand.

The assets have gone from strength to strength in terms of their valuations and sales performances and proven very resilient in the face of major disruptions in recent years, such as the pandemic and severe weather events.

COMMENTS ATTRIBUTABLE TO DON O’RORKE – Chief Executive, Consolidated Properties Group
Our strategy has always based around finding assets that offered strong refurbishment and development potential to hold for the long-term. We have invested to that end accordingly.

We’re proud of what we have achieved with each of these shopping centres in terms of improving their facilities and their retail offering and that shows in their performances.

We have a strong pipeline of leasing enquiry which also speaks to the value of these assets.

Our partnership with CVS Lane is always evolving and dynamic and we regularly look for new valueadding opportunities and we feel this is a good time take these assets to market.

Investor interest and demand for neighbourhood retail has once again heightened. A strong shift towards defensive assets with low-income volatility is occurring given macro uncertainty.

There remains significant equity capital available for low-risk retail assets – from a range of domestic and offshore institutional sources, such as pension funds and unlisted core funds.

As a result, we’re seeing a tactical reallocation towards neighbourhood retail centre, underpinned by a strong daily needs offering, given the resilient performance through COVID-19 and the high-income returns offered relative to prime assets in other sectors.

To put that in context in 2021 there were 61 neighbourhood centres to transact nationally, with a record deal volume of $2.45 billion, 22% above the previous 2019 high.

The fundamentals of QLD-based retail assets have performed very strongly, primarily driven by the highest population growth in the country, including high levels of interstate migration for lifestyle reasons and housing affordability.

The significant population shift has provided a strong tailwind for grocery retail and neighbourhood shopping centres in the past two years. In fact, retail turnover in supermarkets has grown by 16.8% in
Queensland since the start of the pandemic, well above the national average of 12.4%.

Neighbourhood centre assets like these are particularly attractive in the current high inflation environment, given that rental growth generally aligns with underlying inflation. Also, rising interest rates have historically not impacted on grocery sales volumes, compared with other spending, which makes Neighbourhood centres particularly resilient.

Overall, our data suggests that nationally, neighbourhood centre capital values have risen at twice the rate of inflation over the past 20 years.