Buyers Battled for Metropolitan Pubs and Big Brands at Burgess Rawson Portfolio Sale
Big brands and secure tenants continued to lure buyers at Burgess Rawson’s second portfolio auctions of the year, with regional assets among some of the surprisingly strong sales. Childcare assets, service stations, fast food outlets and pubs achieved some of the highest prices at the auctions, held across three days in Sydney, Melbourne and Brisbane. Of the 63 properties listed for sale, 53 sold including six prior, logging a clearance rate of 84%.
National partner at Burgess Rawson Raoul Holderhead said private domestic buyers dominated the auctions, on the hunt for quality stock and a secure income. “Buyers are still out in full force for the quality assets with national brands and good long-term tenants,” he said. Though he added the market “had cooled a little” for the no-name strata retail assets, with enquiry levels having dropped off. Chief economist at real estate firm Knight Frank, Ben Burston, said buyers were still fighting for essential service assets, despite the threat of rising interest rates. “The market is still being driven by robust demand from investors seeking to ride the wave of economic recovery,” he said. “Real estate that provides essential community infrastructure continues to be sought after for the strong income returns and long-term growth potential on offer.” But amid rising inflation, he said flexible lease structures will become increasingly important. “Investors will increasingly gravitate to assets with flexible lease structures that enable rents to be adjusted relatively quickly in line with rising cost pressures.”
Pubs smashing price expectations
One of the highest profile sales of the auction was the historic Sarah Sands Hotel in Brunswick. The owners of the 168-year-old pub, which occupies a prime corner site in Melbourne’s inner north and has recently undergone a $2.7 million facelift, were seeking $7 million-plus. After a handful of bidders registered, the pub sold for $8,750,000 on a yield of 4.19%. Meanwhile the Bentley Hotel and Coles-owned First Choice liquor store, 7.5km from Perth’s CBD, sold for $10,060,000 on a yield of 4.06% after an 82-bid marathon pushed it more than $2 million above reserve. Both pubs offer secure 10-year leases with two ten-year options to pub operator Australian Venue Co. PopTrack economist Anne Flaherty said 2021 was a record year for pubs, exaplaining that growth in buyer demand for hotel/leisure assets in Australia increased by 23% between 2020 and 2021.
Confidence in the regions
The highest price achieved across the three days was $11,000,000 for a store run by The Good Guys in Invermay outside Launceston, Tasmania. The large format retailer, newly leased until 2028 with options to 2048 and annual rent reviews, sold on a yield of 4.68%. Another standout sale was a Toyota car dealership in Echuca, Victoria, which despite having only 2.5 years to go on its current lease term, went 23% over reserve to achieve $6,100,000 on a yield of 4.55%. Mr Holderhead said the appeal of this asset came down to the huge land size of 10,087sqm plus the quality of both the tenant Servco and the Toyota brand, Australia’s top selling car marque. “Plus Echuca is a super regional town,” he added. Another big brand whipping up attention was KFC, with an outlet selling in Seymour in Victoria’s Goulburn Valley for $4,250,000 on a yield of 3.79% and another selling in the central western NSW town of Wellington for $2,600,000 on a yield of 3.88%. Two more surprising regional sales included a 1292sqm commercial site in the western Victorian town of Colac leased to Reece Plumbing, which saw 26 registered parties push it to $970,000 on a yield of 3.82%. And a government medical asset in the Western Australian town of Butler, which sold for $7,175,000 on a yield of 4.04%.
Ongoing love for childcare assets and service stations
Childcare assets were hotly contested once again, with six centres going under the hammer across the three days and two passed in. Advanced Early Learning in Merrylands achieved the highest sale of the Sydney auction of $7,100,000 on a yield of 4.25%. At the Melbourne auction, childcare assets in WA were the standouts, with a new centre in Southern River selling for $6,560,000 on a yield of 4.76%, and another in Wandi selling for $6,050,000 on a yield of 5.04%. “With government subsidies backing the sector, childcare continues to go from strength to strength,” Mr Holderhead said. Meanwhile a new fondness for electric cars appeared not to have dampened investor demand for service stations, with eight selling over the three auctions. Five service stations sold in Queensland, including a Puma in Kedron with lease options to 2075 that achieved $4,310,000, the highest price of the Brisbane auction, on a yield of 5.75%.