Investors upsize their appetites for high-yielding regional fast food outlets

Wednesday 7 August 2013

Written by Stephen Taylor, Property Observer

The sale at auction of three regional fast food outlets has demonstrated the strength of demand for commercial premises, according to commercial real estate agents Burgess Rawson.

They are among a swag of recent sales to investors taking advantage of low interest rates and the emergence of self-managed super funds acquiring commercial property.

At its Melbourne portfolio auction yesterday the agent sold $13.81 million worth of property (nine out of 12) at an average premium above reserve of $145,000 – or 10%. This equates to a total premium above the combined vendors’ reserves of $1.31 million.

The Toowoomba Red Rooster outlet was sold by a Melbourne-based vendor for $1.78 million at a yield of 7.23%. This was at a 19% premium above the reserve, according to Burgess Rawson agents Robert Stanley-Turner and Michael Collins, who fielded bids from Brisbane and Toowoomba.

“Based on our records, the yield is the strongest for a Red Rooster since we sold the Colac freehold at 7.1% about 12 months ago,” Stanley-Turner says.

The Ararat Domino’s Pizza outlet sold for $500,000 on a yield of 6.2%. At shops 3 & 4, 1 Ingor Street, the new premises comes with a five year lease with multiple renewals. It’s one of more than 800 Domino’s stores in five countries. The double fronted shop on two titles was recently decorated in the latest corporate livery at a cost of $200,000. It comes with fixed 4% annual rent increases and a return of $31,000 per annum.

The Leongatha Subway store in South Gippsland was sold for $600,000 at a 5.4% yield. It was one of three premises owned by the same vendor. “The sale price reflects a blended 19% premium above his combined pre-auction reserves,” says selling agent Raoul Holderhead.

“The Subway and a Leongatha VicRoads office ($920,000) were bought by same local buyer and an IGA Liquor outlet was bought by a Melbourne based private investor.

“Based on our records, the 5.54% yield for VicRoads is unprecedented for Government leased investment property anywhere in Victoria.”

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