Slurping up a hot investment

The appetite for fuel and convenience outlets is voracious, according to Burgess Rawson, as investors forked out $78 million for 15 stores leased to 7-Eleven in the agency’s October portfolio auction.

The buying bonanza recorded a stunning average yield of just 4.67 per sent, with a store in the outer Sydney suburb of Liverpool netting $5.75 million on a slim 3.82 per cent yield.

Burgess Rawson’s December auction will offer three more 7-Eleven stores in Caboolture, Toowoomba and Plumpton, and competition to lodge the winning bid expected to be fierce.

The Caboolture and Toowoomba sites are likely to stand out as there were no Queensland 7-Eleven outlets at the most recent auction.

The properties are leased until 2032 with options for a further 15 years.

The two-year-old premises offer significant depreciation benefits and fixed annual rent increases of 3 per cent.

Investors who missed out on a Slurpee-dispensing sensation at last month’s auction can vie for five more fuel and convenience outlets going under the hammer in December.

They are tenanted by Puma Energy, Shel, Coles Express, Unites Petroleum and EG/Woolworths Petrol.

The latter’s site in Sydney Road, Coburg, is a blue-chip freehold with potential for a six-level development and an expected price tag of about $4.5 million.

Explaining the increased demand for fuel and convenience stores, Burgess Rawson managing director Ingrid Filmer said the assets appealed because they were ‘set-and-forget’ investments.

“All the tenants in this sector are high quality, good corporate citizens and they heavily research the sites to ensure that they are well-located for long-term tenure and business growth,” she said.

“They do all the homework for you, from mapping expected future traffic flows and more, so a landlord buying the property can be confident a thorough business case has been made by the tenant. Plus, these types of assets come with a range of returns, yields and entry-point pricing, appealing to diverse investors.”

Director Jamie Perlinger descried the sector’s vision as ‘petrol re-imagined’.

“While their core business may be selling fuel, they collect much of their revenue from their convenience offering, whether it be Slurpees, premium coffee, fresh sandwiches and pastries, or other groceries,” he said.

“Some outlets are even adding click-and-collect groceries and co-locating with Australia Post services.

“We have found that the demand for this class of asset is huge. The locations are great, leases are simple and with a single tenant with good fundamentals and a better understanding of EPA compliance than in year past.

“Plus, the sites have plenty of land, which in future could be repurposed to adapt to changing conditions.”

According to director Billy Holderhead, last financial year cross-border investors ‘ruled fuel stations’, picking up 24 of the 28 sites offered.

“Private purchasers and syndicates made up the majority of the buyers, with yields ranging from 4.1 per cent for a metro service station to about 9 per cent in remote regional areas,” Mr Holderhead said.

“Commercial property buyers have increasingly displayed interest in retail fuel investments, with Burgess Rawson transacting more than 118 fuel assets for a combined total of $526 million since January 2016.”

Given the tighter yields recorded at this financial year’s auctions, coupled with fewer fuel sites being offered, it is expected investors will once again rally strongly at the December 11 event from 11am at Crown Casino.

A total of 23 properties, including the fuel assets, will be offered.

Published in the Herald Sun.