Burgess Rawson breaks own record with 4.3% Dan Murphy’s yield

Published on: 22 September 2020

Commercial property agent Burgess Rawson has broken its own regional yield record in the large format liquor sector with the $8.1 million sale of a Dan Murphy’s freehold investment in Wangaratta, in northern Victoria.

The sale reflected an initial yield on net base rent of 3.68%, and after factoring in estimated turnover rent, the property is expected to return 4.34% for the new owner, the SMSF vehicle of a Melbourne-based private family.

The previous record cap rate was another Dan Murphy’s store sold by Burgess Rawson in Queanbeyan, New South Wales, which set the previous yield benchmark of 4.72% in August 2015.

Burgess Rawson Director Billy Holderhead said the sale result demonstrates the pent-up demand for commercial property investment leased to subsidiaries of Woolworths, Coles and Wesfarmers, particularly those with tenants in essential service sectors.

“The property sold in just six days,” said Mr Holderhead. “In that time, we introduced the property to seven investors, three of whom submitted executed contracts above the asking price for the vendor’s consideration.”

Mr Holderhead added that the result speaks volumes for the current market sentiment.

“We have seen demand for freehold investments leased to non-discretionary businesses build over the last 12 months, in particular with private ‘mum and dad’ investors and family offices looking for the security and long-term returns that commercial property provides.”

Burgess Rawson noted that more than 50 individual bidders were unsuccessful in securing six Woolworths, Coles and Wesfarmers properties it offered in the last 12 months – a Coles First Choice Liquor in Werribee, three Bunnings investments in south east Queensland, a Woolworths in Seymour and a Coles in Drouin. All three bidders for the Wangaratta Dan Murphy’s carried over directly from this buyer pool.

“The vendors saw an opportunity to capitalise on this demand,” said Mr Holderhead. “As Dan Murphy’s properties are coveted and rarely hit the market, the decision proved lucrative.”

Burgess Rawson Director Jamie Perlinger said there is a clear separation between properties where tenants have traded through COVID-19 and those that haven’t.

“Essential service businesses have been well-placed to benefit from community lockdowns,” he said. “Dan Murphy’s and BWS, for instance, reported a 21.4% revenue increase in the first 10 weeks of the June quarter. Buyers were aware of the tenant’s success through the pandemic and they recognised the ‘defensive’ qualities of the opportunity.”

As the most active commercial agent for tenanted investment sales throughout COVID-19, Burgess Rawson has navigated restrictions in Victoria by moving from their signature Portfolio Auction events to alternate sales methods, while maintaining like-for-like results for its vendor clients.

Since the WHO pandemic declaration on 11 March, Burgess Rawson has sold 113 commercial properties with a value of over $333 million. These were made up of 82 off market sales and 31 Portfolio Auction sales.

“Our focus has been on essential service investments, which has made up $278 million (or 83%) of our sales,” said Mr Perlinger. “Demand is more intense than ever, and we can demonstrate that there is no COVID-19 related price deterioration in these sectors. In fact, we’re seeing compression. The new record yield for the Wangaratta Dan Murphy’s demonstrates that.”

Burgess Rawson’s next Portfolio Auction on 23 September will be an online event with telephone and online bidding.

Although Stage 4 COVID-19 restrictions in Victoria have limited the ability for interested buyers to inspect properties, it certainly hasn’t stopped activity in the market.

“Buyers are keen and ready to buy, so we have quickly adapted. With extra emphasis on video and photography, 31 of the 52 properties sold by our Melbourne office through the pandemic have been bought sight-unseen,” said Mr Perlinger.

For further details on the portfolio currently available, call 9613 0400 or visit burgessrawson.com.au

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