18
Jun

Low yields continue for fuel and fast-food retail properties

Private Melbourne-based development fund PE Capital has sold the last tranche of its 1.1-hectare Cranbourne site in Melbourne for $8.25 million, along with a developed 7-Eleven service station and retail shops.

PE Capital sold the 4200sq m property at 1016 Cranbourne-Frankston Road to a local family. It includes a newly built 7- Eleven service station, a newly-leased Oporto fast-food shop and a Smokin Joe’s Pizza.

The 7-Eleven lease is 15 years while Oporto and Smokin Joe’s have signed for ten-year terms each.

The total net annual rental income from all the leases is $503,060, or about 5.47 per cent on an initial passing yield.

The other two tranches are a 3000sq m site which PE sold to McDonald’s for $2.95 million and a 3800sq m site which sold to a KFC franchisee for $1.95 million. Both were offloaded last year.

McDonald’s has since built a new restaurant on their site while the KFC franchisee, Southern Restaurants is in the process of making plans for a new restaurant. That site was originally earmarked for a childcare centre.

CBRE’s Joseph Du Rieu, Kevin Tong and Mark Wizel negotiated the sale.

Mr Du Rieu said many listed funds and syndicators competed hard for the investment given its attractive long term leases to defensive fast-food tenants, but found themselves priced out by the private investor or mum-and-dad market.

Investors find these assets appealing not only for its a solid defensive cashflow but also for life-time depreciation.

Mr Du Rieu also said the limited supply for fast food and fuel retail investments had not been able to meet demand.

The 7-Eleven property is located near the 200-home Canopy at Amstel masterplan residential community being developed by Brown Property Group.

 

Extracted from AFR