Lygon Street premises of Donati's Fine Meats smashes records with emotion-driven $2.89 million sale at auction
The historic Lygon Street premises of Donati’s Fine Meats in Carlton has sold for $2.89 million at auction, with a private investor paying nearly $1.4 million above pre-auction expectations for the trophy inner-Melbourne retail asset.
The price equates to $38,533 per square metre for the 75-square-metre two-level Carlton premises, a yield of just 2.31%.
The 402 Lygon Street building was up for sale for the first time in 100 years, having operated as a butchery since the early 1900s, with Donati's based there since 1972.
Colliers International agent Jeremy Gruzewski, who led the campaign alongside colleague Tom Noonan, admitted the price paid made little financial sense, with emotion driving the bidding.
“People have been ringing me and asking if it was a misprint,” he told Property Observer soon after the October 30 auction.
The two most recent sales on Lygon Street were the 84-square-metre premises of Intrepid Travel at 231 Lygon Street, which sold for $1.9 million in July last year equating to $22,619 per square metre and a passing initial yield of 3.62%, and 163-165 Lygon Street, the premises of Casa Del Gelato, which sold for $2.8 million ($10,294 per square metre) in June 2010 on a yield of 3.48%.
In absolute terms, the highest price paid since August 2008 was $3.71 million paid for 350 Lygon Street, a two-level corner site in November 2009 measuring 173 square metres, equating to $21,445 per square metre. The shop is leased to national hamburger chain Grill’d.
The sale of the butchery premises is only the eighth sale of retail premises on Lygon Street in the last four years, reflecting just how tightly held the retail strip is, with the low yields reflecting the attraction of owning property on one of Melbourne’s most famous suburban retail strip, which is lined with Italian restaurants, ice-cream shops and cafes.
Gruzewski says emotions were the overriding factor driving the record price per paid per square metre for the butchery, which attracted a lively, 60-strong crowd and an opening bid of $1.4 million.
In total there were almost 80 bids, with three parties pushing the price upwards, before finally selling to the unnamed high-net-worth investor.
“The property generated in excess of 70 enquiries from owner-occupiers and investors looking for a well-located retail investment,” says Noonan.
“There is an enormous level of demand for retail properties of this size and within close proximity to the CBD."
Gruzewski says the purchaser plans to own it as an investment in the medium term.
“This sale re-enforces the strength of the Melbourne retail investment market, which has been driven by investors wanting to secure well-located retail properties under $3 million.
“402 Lygon Street was further evidence that there is a continued strong demand from investors to secure city fringe freehold assets with genuine value add potential.
“A sale of this magnitude begs a couple of questions. Firstly, is the confidence of Melbourne investors on the rise, and secondly, is the imminent interest rate reduction making investors look to old fashioned ‘bricks and mortar’ to place their cash? We certainly think so, on both fronts.”