Yield-hungry buyers snap up retail, childcare assets worth $60m

The 93 per cent clearance rate, one of the highest of the year, highlighted the very strong appetite for assets leased to “essential services” tenants – those that proved resilient during the pandemic.

Sales included a KFC restaurant in Dee Why in Northern Sydney, which was bought for $7.22 million by a local Sydney investor on a yield of 3.4 per cent. It came with a lease in place until 2028.

It was one of five fast-food investments that sold on the day, all offering long leases to national brands.

A newly built Hungry Jacks in Springfield, Brisbane sold for more than $5 million on a 4.06 per cent yield, and a McDonald’s in Scone in the NSW Hunter region fetched $5.8 million on a 5.08 per cent yield.

Seven childcare centres in NSW and Queensland sold individually for a combined $23.79 million, with average yields of 5.5 per cent.

Strong demand for regional assets

“Investor confidence [for childcare centres] is high given the government support the sector received during the earlier stages of the pandemic, and we have witnessed yield compression of around 25-50 basis points over the past three months,” Cushman & Wakefield’s Tom Moreland said.

There was also strong demand for regional properties offering higher returns. A Mitre 10 in Airlie Beach sold for $5.4 million on a 6 per cent yield and a NAB branch in Wagga Wagga fetched $2.45 million on a 6.35 per cent yield. Both sold significantly above their reserve.

“Given their focus on yield, high net worth investors continue to aggressively target commercial property investments with long-term leases to blue-chiptenants in resilient industries,” said Cushman & Wakefield’s head of national investment sales, Michael Collins,

“The RBA has signalled that interest rates are likely to remain low for the next three years, so we expect demand for alternative assets will build into 2021 as investors seek higher-yielding, defensive investment opportunities to bolster their portfolios.”

The near sellout success followed another agency, Burgess Rawson selling 90 per cent of the convenience stores, car wash outlets, childcare centres, and fast food outlets it offered at auctions in Sydney and Melbourne last week.

Cushman & Wakefield agent Yosh Mendis, who marketed the Dee Why KFC and the McDonald’s in Scone, said wealthy investors continued to be drawn to fast food properties in strategic locations leased to tenants such as McDonald’s, KFC and Hungry Jacks.

“These assets were heavily bid on, particularly given the fast-food sector’s proven ability to trade strongly through the pandemic,” Mr Mendis said.

He attributed the overall success of the portfolio auction to the quality of the properties for sale.

“Fast food, childcare and fuel are the most hotly contested assets,” Mr Mendis said.