Rich Listers cash in on appetite for recession-proof retail assets
The Rich List owners of the 7-Eleven convenience retail chain were among the big winners of a sold-out commercial property portfolio auction in Sydney on Tuesday, as rising interest rates failed to dent enthusiasm for petrol stations, fast food and childcare on long leases from cashed-up private investors.
Of the 10 properties offered for sale, a 7-Eleven petrol station on the Pacific Highway in Killara on Sydney’s Lower North Shore achieved the highest price under the hammer after selling to a Sydney investor for $7.5 million on a yield just below 4 per cent.
The 7-Eleven chain is owned by Rich Lister Russell Withers and the family of his late sister Beverley Barlow. The chain, which agreed to pay back $270 million to former employees of 7-Eleven franchisees following major wages scandal in 2015, comprises around 700 retail outlets, of which about a fifth are company-operated. 7-Eleven turns over about $4 billion a year.
The Killara 7-Eleven was one of two properties that sold on sub 4 per cent yields at Tuesday’s portfolio auction put together by commercial real estate firm Burgess Rawson.
The other to property to crack that benchmark was a McDonald’s restaurant in Broken Hill in outback NSW.
The freestanding property directly adjoining the Woolworths-anchored Westside Plaza sold under the hammer for $5.75 million on a 3.9 per cent yield.
The McDonald’s sold with five years remaining on a 20-year lease that included attractive CPI-linked annual rent reviews and turnover rent.
Both sales continue a trend that emerged last year of private investors, preferring to park their money in retail assets on long leases to major brands, rather than in equities or the devaluing housing market.
Highlighting this trend, developer Spectrum Retail Group sold a fast-food investment in Orange, NSW, that is leased to the Mexican-inspired chain Guzman Y Gomez, before completion for $6.3 million on a 3.8 per cent yield earlier this month. The buyer was a Sydney-based private investor.
The sale of this restaurant and the McDonald’s in Broken Hill were both handled by Burgess Rawson’s Yosh Mendis.
Mr Mendis said demand for fast food assets has remained strong due to continued strong turnover in the recession-proof sector, and secure long-term landlord friendly leases.
Restaurants leased to McDonald’s, KFC, Hungry Jacks and Guzman Y Gomez are considered one of the safest investment vehicles in the market, Mr Mendis said.
“These are recession-proof assets that rarely come to market, so investor demand is high,” he told The Australian Financial Review.
“There’s really been no movement [in values or yields] for these properties.”
Overall, five out of 10 properties sold under the hammer at Tuesday’s portfolio auction including a Bathurst Centrelink which went for $5.1 million on a 7.l per cent yield and a Viva Energy petrol station in Adelaide, which sold for $6.6 million on a 5.5 per cent yield.
The remaining five, including four shops in the Mungo Scott Place redevelopment in Summer Hill in Sydney’s inner west and a childcare centre in Lake Cathie near Port Macquarie were negotiated sales.
Combined sales totalled $35 million with an average yield for the day coming in at 5.25 per cent.