Portfolio of 7-Eleven service stations to headline big week of commercial auctions
Forty-six commercial properties are set to go under the hammer over two consecutive days this week, with a portfolio of 7-Eleven service stations the headline act.
It’s the largest number of properties to be offered for sale in one week by Burgess Rawson in 2019, with the 7-Eleven auction coming in addition to the real estate firm’s usual monthly Melbourne and Sydney portfolio auctions.
The 15 fuel-convenience outlets are being offloaded by fuel retailer Russell Withers’ 7-Eleven group, with price expectations for the entire portfolio at $70 million, and individual asset price guides ranging from the high $2 million mark up to $7 million. The assets are being sold on a sale-and-leaseback arrangement to free-up capital for reinvestment into new stores.
The properties are in NSW, Victoria, Western Australia and the ACT, with annual net incomes from $147,215 up to $395,193 for a service station with a McDonald’s sublease in Campbellfield, Victoria, which is expected to fetch the highest price on the day of about $7 million.
A site at 104 Great Western Highway, Colyton, in western Sydney, will likely be the cheapest property on offer, with price expectations between the high $2 million and low $3 million mark.
More than 850 people have inquired about the portfolio, according to Billy Holderhead, director with Burgess Rawson Melbourne.
“We’re mainly talking about private families and high-net-worth private investors. There’s a lot of existing fuel owners with an existing interest in the fuel sector who are looking to grow that,” Mr Holderhead said.
Prospective buyers have been attracted by what Burgess Rawson director Simon Staddon said was an “incredibly conservative” lease structure – meaning properties were much cheaper than comparable service stations in similar locations.
“For all of these sites, the affordability factor is incredible. The capital value is far greater than the rents indicate – the rental agreement is very conservatively set, which is a great opportunity to buy a service centre at a much cheaper rent,” Mr Staddon said.
Mr Holderhead said that asking prices would be nearly doubled if the properties were being sold by a developer and rents were higher – citing the property at 95 Elizabeth Drive, Liverpool, as an example.
“If it was being sold by a developer, the Liverpool property, for example, was likely to fetch $400,000 per annum, which would translate to an asking price of around $8 million – but we’re talking about the $4.5 million mark for the Liverpool site,” Mr Holderhead said.
As each property has just commenced a new 12-year lease, with 3 per cent annual rent increase and options to 2048, they are being marketed as an ideal long-term investment.
“The bang-for-buck thing is not lost on anybody – that aspect brings in a lot of people,” Mr Holderhead said.
Some existing 7-Eleven operators familiar with the company’s lease covenants had shown interest in the properties, with both agents expecting at least one buyer to make multiple site purchases at the auction.
The central location of many of the assets means that they will also be attractive to long-term ‘land bankers’, or buyers who were looking at longer-term development potential, with 7-Eleven responsible for site remediation work under the lease agreement as well as all outgoings.
“A couple of these sites have extra land with them – including Liverpool and Colyton – which could be used for further development,” said Mr Staddon.
In particular, a site at 20 Mort Street, Braddon – in the centre of Canberra – would likely attract interest from land bankers with an eye on the precinct’s long-term transformation.
“It’s almost a corridor of high-rise development going on along that road, with well over a billion dollars of development taking place, including the expansion of the Canberra Centre and residential projects. This site is sitting there in the middle of it all on well over 2000 metres – it has a huge street frontage,” Mr Holderhead said.
The service station auction will be split between Sydney and Melbourne auction rooms on Wednesday, October 30, with listings allocated to each auction room according to their location. The Sydney auction will start at 10.30am, and then the bidding will shift to Melbourne at noon. Auctions will be live-streamed into Burgess Rawson offices in Canberra, Perth and Brisbane with bidding expected from interstate.
The Melbourne portfolio auction will be conducted following the conclusion of the service-station sales on Wednesday, October 30, with the Sydney portfolio auction to take place on Thursday, October 31.
