Retiree Adds Ambo Station to Super Fund

Published on: 26/10/2023

The $3 million sale of an ambulance station in Melbourne’s outer southeastern suburbs on a yield below 4 per cent was the standout result across three days of commercial property auctions this week, as investors piled into government-backed social infrastructure, essential services and fast-food retail outlets.

Offered by prominent Melbourne publican Peter Francis, the Narre Warren property – purpose built for Ambulance Victoria in 2010 – came with a renewed six-year lease and CPI-linked annual rent reviews.

It was acquired by retiree investor John Virgona for $3.03 million on a yield of 3.96 per cent – 14 basis points below the cash rate, which is expected to rise by another 25 basis points before the end of the year. The property was called on the market at $2.7 million and generated 29 bids in total.

Mr Virgona acquired the property for his self-managed super fund and without the need for bank finance, meaning rising interest rates will not affect his return. ‘‘It’s a very secure investment. It’s just what I need. It won’t give me any trouble,” Mr Virgona told The Australian Financial Review.

Asked about the relatively low return, he said because annual rent reviews were linked to inflation, his return would rise to 5 per cent over the next two years. ‘‘It’s a great investment. I can’t see Ambulance Victoria moving out,” he said.

Mr Virgona will add the ambulance station to a portfolio that includes a childcare centre. He bought it to replace an Elders-leased property that he held for 16 years.

His investment continues a trend, which has emerged since the pandemic, of private investors favouring ‘‘essential services” commercial property on long leases rather than residential property or shares. Assets priced below $5 million requiring little or no financing amid rising interest rates have become a particular hotspot.

In total, just over $63 million of commercial property changed hands in auctions held on consecutive days in Sydney, Melbourne and Brisbane by commercial real estate firm Burgess Rawson. These generated a combined clearance rate of about 80 per cent. The average yield was 5.87 per cent, an increase of 35 basis points on auctions held in September.

Burgess Rawson CEO Ingrid Filmer said investors were out in full force snapping up government social infrastructure assets such as the Narre Warren ambulance station as well as childcare and medical centres.

‘‘The surging demand for recessionproof GSI assets is driven by their sticky tenant base, which ensures long-term tenancies,” she said. ‘‘These government-backed entities provide essential services to communities, making their presence stable and their tenancies secure.”

Highlighting the demand among private investors, Burgess Rawson counted 232 bids across Sydney and Melbourne for GSI assets that generated $19.2 million in sales. The average yield for metro-based assets was 4.85 per cent.

A further three medical centres sold at a Brisbane auction on Thursday for a combined $7.5 million, to take total GSI sales to almost $27 million.

These results included a medical centre in Bateau Bay on the NSW Central Coast, offered with a new 10-year lease, that sold for $3.059 million on a yield of 4.9 per cent and a therapy centre leased to Royal Rehab Lifeworks in Parramatta Park in Cairns (also with a 10-year lease) that sold for $3.655 million on a yield of 5.75 per cent.

Two childcare centres in Western Sydney – one in St Clair, the other in Prairiewood – sold respectively for $2.41 million on a yield of 5.23 per cent and for $2.52 million on a yield of 5.37 per cent.

Retail assets leased to essential services operators such as pharmacies and fast food were also in demand, as were large-format retail warehouses.

In Horsham in regional Victoria, an Amcal pharmacy in operation since the 1880s sold for $1.63 million on a 5.87 per cent yield. A BCF (Boating, Camping & Fishing) outlet in Ulladulla on the NSW South Coast sold for $4.005 million on a 4.72 per cent yield.

A Domino’s pizza outlet in Rockhampton sold for $1.39 million on a 4.5 per cent yield and a Guzman y Gomez restaurant in Ipswich sold for $4.015 million on a 4.76 per cent yield.

Retiree John Virgona bought this Ambulance Victoria facility on a yield below 4 per cent: ‘‘It’s a great investment. I can’t see Ambulance Victoria moving out,” he says.

Australian Financial Review by Larry Schlesinger


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