Day 2: “We Are the Stock Exchange of Real Estate Investment” Burgess Rawson’s CEO talks on Today’s Live Portfolio Auction in Melbourne.
After the impressive results achieved on Day 1 of the Burgess Rawson portfolio auction in Sydney yesterday, the show continued in Melbourne today with even more spectacular results. An extraordinary 23 out of 24 properties sold under the hammer generating a 96% clearance rate.
As has been the trend of late, there was a heavy focus on high quality regional assets, partly driven by the residential boom in country Victoria and also, possibly by the government’s 50% discount on stamp duty introduced last year for commercial property purchases in the regions. Traditionally, yield has always been more attractive in these areas, however as noted by Ms. Ingrid Filmer, CEO of Burgess Rawson, the yield gap between Metro Melbourne and Regional is now closing.
“The yield differential between metro and regional is actually shrinking at an alarming rate. Overall, our clients are seeking quality covenant, building and landholding and this is where the demand is.”
Ms Filmer also talks of car yards being a popular emerging category amongst buyers.
“There is huge investor appetite for car yards. The results for the two dealerships in Echuca were a stand-out with the Toyota freehold selling almost 23% over reserve – incredible when you consider there was only 2.5 years to go on the current term of the lease. Since September 2021, Burgess Rawson has sold 4 of the last 6 standalone dealership freehold investments in Victoria, totalling close to $50m and a yield below 4%.”
Fast food was also a top performer today with KFC in Seymour selling for $4,250,000 and a yield of 3.79% together with a secure 10 year lease and 3 x 10 year options. Of the last 120 KFC sales, Burgess Rawson has sold 82 of them and it is no wonder why this is so, having seen the extraordinary results they achieved today. The bidding for KFC Seymour started at $3.7 million with the hammer almost coming down, however it appeared that the charm of auctioneer David Scholes got the better of investors. The bidding was confident and competitive and once the $4million ‘mental barrier’ was overcome, it was a steady ride to the finish line.
Another impressive result was the Sarah Sands Hotel in Brunswick, Melbourne. It sold for $8,750,000 with a 4.19% yield.
Having purchased the pub in 2017, Vendor and Managing Director of Peregrine Projects, Joseph Chahin embarked on a 5-6 year journey to bring the pub back to life with a high quality fit out which in turn, attracted Australia’s second largest pub operator, Australian Venue Co. as tenant.
“We’re very proud of what we’ve achieved,” stated Mr Chahin. “The asset we delivered attracted the right style of tenant and we were fortunate enough to attract the Australian Venue Co to operate the pub. Our expectation was that purchasers who inspected the property would have a genuine appreciation of the level of fit-out that we undertook and this was supported by the strength of the covenant in the Australian Venue Co. taking out such a long term lease over the property. Cash flow stability is a key both in the short term and medium term and we knew that the asset would be well received by the market. We are really happy for our purchasers, we understand they’re a local Melbourne family and so we’re certain they will enjoy a great history with the pub having a tenant like that.”
There was clearly great sentiment from both vendors and buyers today in addition to the many spectators who were keeping their eyes and ears to the ground, possibly preparing themselves for the next round of Auctions taking place on May 10th, 11th and 12th, 2022.
“Our portfolio auctions are setting the market,” stated Ms. Filmer “They take place every 6 weeks and the results are the most up to date pricing and indication of the market. We are like the stock exchange of real estate investment. We have had up to 5000 people tuning into our auctions as they are using them to not only purchase but also witness the market over this 3 day event which delivers a snapshot across Australia.“