This article originally appeared in Australian Financial Review
Sydney-based wealth manager Real Asset Management Group (RAM) has grown the value of its retail property fund to $250 million after buying the Woolworths-anchored Mowbray Marketplace and Target Centre in Launceston for $38.55 million.
The deal for the sub-regional shopping centre was struck on a yield of 7.35 per cent, a return RAM expects to lift a further 30 basis points through operational improvements, new tenants and cost savings.
The acquisition follows RAM snapping up the Broadway Plaza at Punchbowl in Sydney’s south-west for $41.2 million in April on a yield of about eight per cent and the Ballina Central shopping centre in Northern NSW for $46.25 million from Alceon and CP Retail on a 7 per cent yield in November last year.
RAM was founded by former UBS Wealth Management head of banking products Scott Wehl and is led by another former UBS wealth management executive, Scott Kelly. It invests on behalf of both local and Asian-based high net worth investors and family offices. Investors include Newcastle-based Pritchard Equity.
Head of real estate Will Gray said one of the attractions of the Tasmanian retail property market was the disparity in yields and prices relative to Victoria.
“The benchmark for our investment strategy is the [ASX-listed] SCA Property Group, which has 15 per cent of its portfolio in Tasmania,” said Mr Gray.
Added attraction
He said an added attraction of the centre was the low ratio of speciality stores to its two anchor tenants and there being no apparel or discretionary retailers in the mix. “It’s not Amazon-proof, but if things go bad [in retailing] they won’t go as bad in this centre,” Mr Gray said.
The Mowbray sub-regional shopping centre sits on a 3.54-hectare site 4km north of the Launceston CBD with 11,700 square metres of retail space with 423 car spaces. The vendor was the centre’s Melbourne-based developer Highbrand and its investment partners.
The centre is made up of two main buildings, a service station and a free-standing drive-through bottleshop.
The original Mowbray Marketplace was built in 2000 and comprises a Woolworths supermarket, a Reject Shop and 10 specialty stores. The newer Target Centre on the southern side of the site was built in 2013 and is anchored by a full-line Target department store, Chemist Warehouse and four specialty stores.
“It is a great fit for the RAM Australia Retail Property Fund, which focuses on quality neighbourhood or convenience-based shopping centres with strong tenant covenants aligned to non-discretionary spending,” Mr Gray said.
“Almost 70 per cent of income from this centre is derived from Woolworths and Target on long leases and there is a low ratio of specialty shop income to anchor tenant income,” he added.