For the first time in seven years, the Elermore Shopping Centre in Elermore Vale, just 9km west of Newcastle, has sold with a private syndicate snapping up the neighbourhood centre for circa $18 million on a 6.8 percent passing net yield.

Located at 133 - 137 Croudace Road, the single level, enclosed and strong performing centre comprises a large Ritchies SUPA IGA supermarket supported by 17 non-discretionary specialty tenants, with 4,048sq m of gross lettable area on a 23,882sq m site including additional land ready for development, car parking for 235 vehicles and an estimated fully leased net income of circa $1.44 million.

According to Steven Lerche, National Director, Retail Investments at Savills Australia, who sold the asset with colleagues Andrew Palmer and Ben Nastasi, on behalf of Bamm Group, “Newcastle is seeing a surge in investment activity, largely stimulated by the $6.55 billion State Government investment mandate which has brought to light the new light rail system on Hunter Street, the new transport interchange at Wickham, construction of the Newcastle City University Campus and much more.

“We are seeing a lot of investor interest come from the Sydney investment market and interstate markets such as Melbourne and Brisbane due to the significant growth prospects of Newcastle.

“Retail assets have been in particular favour with developers due to their strategic locations, large site area, existing income stream and potential to re-develop under the existing planning controls.

Mr Lerche said an immediate development opportunity exists on two blocks of undeveloped land (4,382sq m) that has favourable B2 Local Centre Zoning.

“There is also further value-add opportunity through an expansion of the existing shopping centre (STCA) and future mixed use development upside,” he said.

Newcastle is the largest regional economy in Australia and is the second most populated area in NSW. Elermore Vale is a popular and established residential suburb surrounded by schools, childcare centres and community facilities, with a key primary population of 5,759* residents and an estimated population of 20,459* within the main trade area.

According to Andrew Palmer, Associate Director, Retail Investments at Savills, “The median house price in Newcastle is $595,000 compared to approximately $1.17 million in Sydney (according to Domain Group’s rental and house price report) and investors are taking notice.”

Mr Palmer went on to say that it is interesting to note that a new State Custodians Galaxy Poll showed while a high proportion of Victorian investors (72 percent) are still set on buying in Melbourne, almost half of NSW investors (49 percent) are looking beyond the big smoke to invest their money.

“Elermore Vale and its surrounding suburbs are certainly set to reap the benefits of this surge in investor demand” he said.

Steven Lerche sold the Elermore Shopping Centre to Bamm Group in 2011 for $8.3m with Ben Nastasi acting on behalf of the purchaser. At the time, the property was anchored by BiLo on a short lease.

Ben Nastasi successful managed the property for six years and through active management and leasing initiatives secured Ritchies IGA on a new lease; strategically improved the tenancy mix via identifying gaps in the mix and repositioned the Centre to own its food and service convenience position within the immediate catchments.

The successful uplift increased the income by some approximately 80 percent. Ben’s advisory capacity helped in a cosmetic upgrade and was key in Bamm Group purchasing adjoining income producing property for land banking, whilst instrumental in rezoning this allowing for future expansion or redevelopment.

Mr Nastasi, Director, Retail Services, Asset Management at Savills said “The sale of Elermore Shopping Centre some six years ago was timely and enabled Bamm Group to more than double their capital with the sale of the property achieving a price of close to $18m”.