17
May

Investors fuel up on service stations at Burgess Rawson auctions

Service stations across Australia proved the standout sales at a series of commercial real estate auctions in Sydney, Melbourne and Brisbane, netting prices that were an average of 11 per cent above their reserves.

A United Petroleum station in Victoria’s Altona North proved the biggest drawcard, selling for $8.62 million with a rent of $434,425 and a 5.04 per cent yield. A Mobil station in NSW’s Wagga Wagga wasn’t far behind at $7.5 million, at a rent of $426,619 and a 5.69 per cent yield.

“Fuel, as well as other essential services, are selling extremely well at the moment,” said Yosh Mendis, the Sydney-based head of leading auction house Burgess Rawson, which held the major investment portfolio sell-offs. “The big thing for us is that commercial property is people’s much preferred investment at the moment because it offers a stable and secure income stream.

“With commercial, you know what you’re getting from day one. We’re seeing a number of investors pulling out money from the stock market because of its volatility and going to other commercial property because it’s a positively geared asset. With residential, there’s been so much capital growth, it’s hard to get much of a return.”

Fuel stations – as they provide an essential service – are one of the country’s hottest investments, with many now offering mini supermarkets that prop up earnings and cement their standings in local communities.

A number are also installing electric vehicle (EV) chargers to future-proof their assets, but with EVs still making up only 2 per cent of all new car sales, there’s little likelihood that petrol and diesel we be in less demand any time soon.

Other service stations sold in Orange, NSW, for $6.1 million on 5.57 per cent yield, in Crestmead in Queensland for $5.84 million on a 5.22 per cent yield and in Shepparton, Victoria, for $5.77 million on a 5.25 per cent yield.

The auctions in three centres delivered over $130 million in total sales of property with a blended yield of 5.17 per cent. With 35 of the total 43 selling, they achieved a clearance rate of 82 to 83 per cent.

Other assets for sale were childcare centres, which contine their strong run from two years ago, since they were sometimes one of the few businesses that remained open over COVID, for the children of essential workers.

“It’s another essential service underpinned by bipartisan support from the government and investors are paying a premium for the businesses that have strong fundamentals,” said Burgess Rawson Brisbane-based head of agency Adam Thomas. “They’re often on large sites with high land values and are performing strongly in the market.

“There’s a lot of focus on early education in Australia from leading local and international investors.”

Buoying the market was US operator Bright Horizons’ purchase of Bain Capital’s Australian early education business for $450 million – three and a quarter times its revenue – in early May this year, he says. Prior to that was the Canada-based pension fund-owned Busy Bees Group buying the Australian Think Childcare Group.

“We’re seeing strong interest from overseas investors from North America, northern Europe and mainland China in this area,” said Mr Thomas. “It’s often the property and the business with good operators and strong lease terms at the same time.”

One of the major sales at the auctions was the Goodstart Early Learning Centre at Queensland’s Little Mountain on the Sunshine Coast for $2.43 million at the record regional yield of 4.27 per cent. Also notable was a NSW childcare centre’s sale, in Cowra, for $3.38 million at a 4.99 per cent yield.

The biggest sale of the week, however, was for a Bunning store in Mount Isa, Queensland, for $16.202 million, on another low yield of 4.29 per cent. The very first bid for it at auction was half a million dollars over its reserve.

Another eye-catching sale was that of an In2Performance gym in Victoria’s Noble Park for $6.75 million. “It had an absolute record yield for a gym of 3.76 per cent,” said Mr Thomas. “But it had strong land and property fundamentals and a triple frontage site.”

 

Extracted from Commercial Real Estate