Poll win boon for buyers

Published on: 13/06/2019

Childcare centre landlords and their potentials buyers may have dodged a bullet, with planned spending reforms by the federal Labor Party now off the table, industry experts believe.

If it had won the May election, Labor pledged to spend $4 billion on the sector to boost early childhood education and make childcare more affordable for low-income families.

But the commentary about how this could benefit owners of childcare assets may have been flawed, it is now being suggested.

“Following the Coalition victory, there has been a revised perspective on how childcare-asset owners could have been affected under a Labor government,” said Burgess Rawson director Adam Thomas.

“While some of the changes would certainly have benefited parents and families, there’s a real possibility that they would have negatively impacted business owners and, in turn, property investors and their returns,” Mr Thomas said.

“Introducing significant funding to any industry inevitably brings an influx of new, inexperienced operators.

“With supply and demand of childcare spaces just returning to some sort of sensible equilibrium in recent months, a wave of new operators would only throw out that balance, thus driving down investment returns.”

Mr Thomas cited recent media commentary by G8 Education chief executive Gary Carroll, who reported that take-up of childcare spots had been growing healthily.

Last Week, Mr Carroll said occupancy rates at his group’s 500-plus childcare centres had been already improving before the federal election.

He added that the Coalition win might actually help in lifting long-term returns for shareholders, which he said was a healthier prospect than a short-term spike in values.

“As Mr Carroll rightly points out, the Coalition had been a strong backer of the childcare industry,” Mr Thomas said.

“After all, the significant gains that childcare-asset owners have experiences in the past four years were all driven under the Coalition.

“Its latest childcare subsidy scheme, introduced 10 months ago, has seen occupancy rates increase nationwide.

“So while it may seem like a missed opportunity to have lost a major funding commitment to the industry, Burgess Rawson has a different view. We believe the benefits of a stable economy with strong underlying fundamentals are key to a robust early education sector for years to come.”

A key competitive stimulus to the sector was the relaxation of regulations to allow childcare centres to register as kindergarten providers.

A recent report on the sector by IBISWorld estimated the number of families using approved childcare increased by 9.3 per cent between June 2014 and June 2018, and was tipped to keep growing.

At Burgess Rawson’s last portfolio auction, interest in childcare properties continues to gather momentum, with two Queensland centres attracting a combined 60 bids.

The first, leased for 15 years to Sanctuary Early Learning in Buderim on the Sunshine Coast, sold for $4.1 million on a 6 per cent yield.

The other facility, in Port Douglas, sold for $2.8 million, representing a 7 per cent yield. It has a triple 15-year lease to Petit Early Learning.

The next Burgess Rawson portfolio auction will take place at Crown, at Southbank on June 26.

Three childcare centres are among the 14 properties that will go under the hammer – at Bacchus Mars, 50km northwest of the city, Curlewis, near Geelong, and Albany Creek, in Brisbane’s northwest.

Original Publication by Olga Galacho, Herald Sun


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