Investors snap up $140m of high yielding bricks and mortar assets

Published on: 6 April 2021

Investors have splashed $140 million on an array of long-leased assets that provide higher yields, stable income and long-term tenants in the current low-interest rates environment.

The sales were mostly through the Burgess Rawson second Flagship Portfolio auction for 2021 in Sydney and Melbourne, which saw a clearance rate of 90 per cent. These included childcare centres, service stations and a sire leased to betting agency Tabcorp.

In a separate private sale an investor bought a BP service station at Willoughby on Sydney’s north shore on a 3.85 per cent yield to a private investor who bought it before it went to auction.

The 803 sq m corner site at 498 Willoughby Road was sold for $5.018 million in the third week of the campaign managed and negotiated by Steven Kruyer, senior sales director of LJ Hooker Commercial Sydney.

In addition to the current lease, tenant Jasbe Petroleum Group, operating as BP Willoughby, holds additional options at the site until 2039.

Mr Kruyer said the volume of enquiry for the site from private investors was substantial, underlining the rising attraction of petrol station investments in Sydney.

“Petrol stations are deemed an essential service and have become blue-chip assets for investors following the pandemic, especially when they carry long-term leases with steady income streams,” Mr Kruyer said.

“The Willoughby BP exchanged on such a tight yield because of the further underlying appeal of its development upside. It’s zoned for medium-density residential on a corner site, only eight kilometres for the CBD.“

Mr Kruyer said commercial property assets would continue to carry appeal in the immediate future as investors sought reliable returns in the low-interest-rate environment.

“As we come out of COVID we’ll see a lot of petrol station owners seek to realise growth and test the market.”

At the Burgess Rawson Sydney auction, nine from ten properties sold either prior to auction or under the hammer with the Tabcorp-leased Neutral Bay asset on Sydney’s lower north shore at 128 Military Road going for $3.4 million on a 4.69 per cent yield.

“We received well over 100 enquiries and 18 contract requests – the A-grade ASX listed tenant, location and favourable lease terms were all major drawcards for the interest received in this property,” Burgess Rawson associate director Kieran Bourke said.

Another star sale of the day was a strata-titled pharmacy in Cardiff NSW, tenanted by Star Discount Chemist, which sold for $2.65 million on a low 4.43 per cent yield.

“With the trend of people moving away from central city locations into regional areas, we have noticed a shift in the market with regional assets becoming increasingly more sought after. The sale of the Cardiff Pharmacy is a testament to this growth corridor regional NSW is experiencing,” Mr Bourke said.

“We see investor confidence in regional areas to be a long term transition, not just the current climate due to COVID,” Burgess Rawson director Simon Staddon said.

The demand for essential service properties was evident again, with another pharmacy and a medical asset being eagerly snapped up.

“The sale of two pharmacy tenanted investments including Chemist Warehouse in Nowra, south of Sydney for $2.75 million and the pre-auction sale of a Medical Centre in Mona Vale, on Sydney’s northern beaches emphasises the strength and demand of the essential service medical asset class. This sector is incredibly hot right now and growing in popularity,” Mr Staddon said.

Carolyn Cummins, The Sydney Morning Herald


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