Fast Food, Service Station, Childcare Centre Defy Auction Blues

Published on: 29 September 2020

Private investors brushed aside economic worries and pandemic uncertainty to bid fiercely for a portfolio of “essential services” investments, with 11 of 13 properties – or 85 per cent – selling under the hammer.

The offering of fast food outlets, childcare centres, petrol stations, a bank branch and medical centre generated combined sales of $43.3 million.

This petrol station and Coles Express offering residential development potential sold on a 2 per cent yield.

Yields ranged from 2.06 per cent for an inner-Melbourne petrol station and Coles Express with residential zoning, which sold for $6.5 million, to 7.05 per cent for a medical centre in Wangaratta, which pulled $3.23 million.

Other results included a Cellarbrations liquor store in Monbulk, east of Melbourne, which sold for $1.165 million on a 4.4 per cent yield, and a KFC restaurant in Morayfield north of Brisbane which sold for $5.47 million on a yield of 4.9 per cent.

Traditionally held in a packed auction room at Melbourne’s Crown Casino, Wednesday’s auction put together by commercial real estate agents Burgess Rawson took place at the Sydney premises of Auction Works, with investors able to bid in person, over the phone or online.

With in-person property inspections prohibited in Victoria, Burgess Rawson placed extra emphasis on video and photography to enable interested buyers to virtually inspect the properties before the auction. Seven properties sold without a physical inspection.

A spokeswoman for Burgess Rawson said the auction ran twice as long as expected due to all the bidding, with some auctions running for almost half an hour.

The Shell petrol station in Camberwell generated 41 bids before being bought by a Melbourne-based developer for 14 per cent above reserve, while the KFC in Morayfield also sold to a Melbourne investor without a physical inspection.

“The rare chance to collect rent from McDonald’s saw 21 bidders from Brisbane, Melbourne, Sydney, Canberra and Regional Victoria thrash out a competitive auction [for a McDonald’s and 7-Eleven in Toowoomba] before selling to a Brisbane investor for $8.62 million, reflecting a yield of 5.2 per cent,” said the spokeswoman.

The very strong result followed a similar portfolio auction in Sydney last week where nine out of 10 properties sold under the hammer, including a Dan Murphy’s in Mosman for $13.25 million, generating total sales of $41 million.

Burgess Rawson managing director Ingrid Filmer said demand for high quality freehold essential services has intensified over the past 12 months.

“We were not surprised by the level of interest on Wednesday,” said Ms Filmer.

“Investors are actively searching for freestanding properties that have traded favourably throughout the pandemic.

“When COVID-19 hit, we quickly identified a flight to quality and Wednesday’s auction certainly proved that.”

Extracted in full from: https://www.afr.com/property/commercial/fast-food-service-station-childcare-centre-defy-auction-blues-20200924-p55yq6

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