Childcare centres tipped to fetch $38m

Wednesday 13 June 2018

A portfolio of seven childcare centres in Queensland, Victoria and South Australia will go under the hammer next week, with expectations they could fetch a combined $38 million.

Childcare centres tipped to fetch $38m

The childcare centre at 149-153 Church Street, Geelong West.

The specialist asset class, whose rental income is underpinned by federal government childcare subsidies, remains highly popular with private investors.

To date, selling agent Burgess Rawson has sold 22 centres on an average yield of 5.9 per cent, achieving a 90 per cent clearance rate.

Prices have ranged from $1 million in regional areas to $10 million in high profile capital city locations.

“Investors are attracted to the stability of this asset class, main road locations in built-up areas and longterm tenant leases underpinned by guaranteed government funding,” said Adam Thomas, a director at Burgess Rawson.

“Ongoing low interest rates have caused a shift from the security of cash and bonds to higher-yielding direct property investments.

Risk adverse buyers are therefore competing strongly for limited opportunities to acquire AAA-grade commercial assets like childcare centres,” he said.

Among the childcare centres for sale will be a property at 149-153 Church Street in Geelong West.

Underpinned by a 15-year lease and large high-profile landholding, it is expected to sell for $5.3 million on a yield of 6.5 percent

In the most expensive childcare sale in Victoria for the year, a centre at 1066 Centre Road, Oakleigh in Melbourne, sold for $9.5 million on a yield of 6.3 per cent.

The vendor was Hume Partners and Veuve Property Group, and the buyer a private investor.

Mr Thomas said childcare centres were less vulnerable to cyclical variables than other asset classes and were also unaffected by advances in technology, unlike properties such as fuel and fast food outlets.

In July the federal government will introduce changes to its childcare funding model that will mean families earning $186,958 or less per year will not be subject to a cap on the amount of childcare subsidy they can access.

View the full portfolio here.

View the original article here.

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Written by Larry Schlesinger, Australian Financial Review

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