Biggest childcare centre deal in Melbourne makes sense for investors
ASX-listed HealthCo Health Wellness REIT has sold a childcare centre in Melbourne’s leafy east for $20.5 million, the biggest such deal in that state, as part of a broader asset recycling program.
At 117 Kooyong Road in Armadale, the facility was bought by an Asia-based private investor on a sharp yield of 4.6 per cent, testament to the value ascribed by investors to asset class even as interest rates hit 4.1 per cent this week.
The Armadale centre was among a group of childcare divestments – $45.3 million on a yield of 4.8 per cent – which sold at a 2 per cent discount to their December book values. The HealthCo fund is part of listed fund manager HMC Capital’s stable of funds.
Last week the HealthCo fund flagged $82.3 million worth of divestments, along with another $45 million in due diligence, through its asset recycling program. The property trust has recently bedded down an investment in a $1.2 billion portfolio of 11 private hospitals operated by Healthscope.
CBRE’s Sandro Peluso, Jimmy Tat and Marcello Caspani-Muto brokered the deal. Mr Peluso said the transaction was struck on the sharpest yield for a childcare centre since the 4.25 per cent achieved on a facility in Narre Warren, in Melbourne’s south-east, three years ago.
“With interest rates having risen 3.85 per cent since, the Armadale transaction is a testament to the strong and unwavering investor sentiment toward the early learning sector, in combination with an appreciation for the value of existing centres in a rapidly rising construction cost environment,” Mr Peluso said.
“With an influx of international capital over the past six months pricing is being driven by strong buyer interest from both domestic and international high-net-worth private groups along with multiple REITs looking to increase their exposure into social infrastructure real estate.”
The Armadale facility is run by Explorers Early Learning.
Mr Peluso said both the Armadale facility and other childcare assets under negotiation were in established suburbs, which meant underlying land values were high. As a consequence, coupled with high construction costs, childcare facilities were selling at close to replacement cost, he said.
“There is a reason many large-scale investment funds have stopped development in the short term because they are acutely aware of the risk associated,” he said.
