Funds dine on fast food

Saturday 5 May 2018

Investors have spent more than $300 million on fast food assets, which offer solid yields and long-term leases, according to specialists in the sector, Burgess Rawson.

Investors have spent more than $300 million on fast food assets, which offer solid yields and long-term leases.

Fast food sites such as KFC are popular with investors.

In its new Fast Food Property Investment Report, the agency says fast food asset sales’ yields have compressed from a median 7 per cent in 2012 to 4.92 per cent in 2017-18, across metropolitan and regional locations.

These investments generally range in price from under $1 million to $9 million with incomes starting from about $35,000 per annum for a regional shop front.

Simon Staddon, director at Burgess Rawson, said the assets have a low risk profile with an upside and continue to grow in popularity, particularly with investors who own self-managed super funds.

“They offer long-term indexed income streams, underpinned by strong land values,” Mr Staddon said.

“Demand continues to increase for these tightly held ‘set and forget’ assets, with many landlords holding multiple properties. Investors are prepared to pay a premium to derisk their property portfolios.”

The major brands include Hungry Jacks, KFC, McDonald’s and Red Rooster.

Burgess Rawson has sold more than 78 per cent of major drive-thru free-standing fast food assets Australia-wide over the past five years.

The firm said sales total more than $310 million with an auction clearance rate averaging over 90 per cent, which is one of the highest across the country for commercial property assets.

Neil Honan, founder and managing director of Honan Partners Chartered Accountants, has worked on a number of the deals and said the attraction is that food is a class that is recession-proof.

“People always need to buy food while the long operating hours, seven days per week, offers excellent value from a rental perspective and new fit-outs, which cost in some cases hundreds of thousands of dollars, enable strong depreciation,” Mr Honan said.

“As the commercial investment market continues to grow, investors are often placing more importance on the asset class as opposed to location. The yield differential for fast food assets in metropolitan and regional areas has narrowed.”

The recent sale of a Guzman Y Gomez in regional Coffs Harbour in NSW demonstrates the interest, selling on a low 4.50 per cent yield in December 2017, which is considered a metropolitan yield.

Ingrid Filmer, director at Burgess Rawson said emerging players to watch in the fast food space include Oliver’s, Zambero, Guzman y Gomez and Taco Bell.

Ms Filmer said sustainability programs by franchisees and vendors in the areas where they operate is helping engender community spirit and expand customer bases.

To download your free copy of the Fast Food Investment Report, please click here.

To find out more about the properties in our portfolio, and how we can help you with sales, leasing and property management services, please contact us.

View the original article here.

Originally written by Carolyn Cummins, Sydney Morning Herald

fast food
fast food