Reserves smashed: Investors spend $109m on pubs, childcare and fuel
High net worth investors splashed out $109 million in a couple of hours on pubs, childcare centres and service stations at a sold-out commercial property auction in Melbourne that highlights the depth of appetite for long-leased assets amid record low interest rates.
Reserves were smashed by 11 per cent on average as 26 properties offered for sale by agents Burgess Rawson sold at a packed auction held at Melbourne’s Crown Casino on Wednesday morning.
“The appeal of essential service tenants, long leases, reliable rent and strong land values is proving irresistible,” said Burgess Rawson director Jamie Perlinger.
The agency estimated that demand for real estate was six times greater than what was on offer, based on the $633 million buying potential of registered bidders.
A big winner on the day was ASX-listed pub landlord ALE Property Group, which sold all four of the venues it offered to investors at a more than 20 per cent premium to their book value.
All were sold with leases until 2028 to the country’s largest pub operator, ALH, which is 85.4 per cent owned by Woolworths’ $13 billion IPO-hopeful, Endeavour Drinks.
They included the Pelican Waters Tavern in Caloundra on the Sunshine Coast, which sold for $10.8 million on a yield of 4.15 per cent, more than $3 million above its $7.6 million book value.
All four pubs sold on yields at or below 5 per cent.
Other top results included a Carl’s Jr fast food outlet in Thomastown, Melbourne offering a new 10-year lease, which sold for $6.4 million on a 4.6 per cent yield.
Childcare centres were also in hot demand. A Crest Children’s Sanctuary in Dandenong in Melbourne’s south east sold for $7.63 million on a 5.1 per cent yield, while a Jenny’s Early Learning Centre in Bendigo sold for $3.95 million on a 5.5 per cent yield.
“Today’s auction demonstrated that there is a feeling of confidence and stability as we head into the final quarter of the financial year,” Mr Perlinger said.
“Investors are eager to spend with plenty of undeployed capital sitting frustratingly idle. Consequently, with low stock levels, yields are contracting as investors are comfortable buying at lower yields in order to secure an investment.
“A clear example of this was the sale of Sparrow Early Learning which sold prior to auction for $2.72m, achieving a record yield of 5.36 per cent. This is the sharpest ever yield for a childcare investment in Western Australia. A private investor couldn’t wait until auction day, snapping up the property on a coveted 20-year, triple net lease.”
Wednesday’s auction followed Burgess Rawson selling $67 million of childcare centres, medical centres, petrol stations and fast food outlets just over a month ago, where reserves were smashed by 9 per cent on average and 20 out 23 properties sold, a clearance rate of 86 per cent.
In Sydney on Tuesday, Burgess Rawson sold a further nine out of 10 properties on offer as part of a portfolio auction with total sales of $21.8 million
On Wednesday, more than 1000 people tuned in from countries including New Zealand, America, Hong Kong and Taiwan to follow the proceedings, which were also beamed online.