Bricks and mortar in vogue
Most investors are looking to own the land and install an operator, which generates rental income as well as capital growth.
The US convenience store chain 7-Eleven has raised more than $200 million in the past year selling stores and service stations across Australia. According to the sales agents from Jones Lang LaSalle, these sales have been on yields of about 6 to 7 per cent, with the buyers a mix of private investors and self-managed super funds.
The same category of investors is lining up for childcare centres. Burgess Rawson director Dean Venturato said the levels of interest in childcare centres had sale returns rivalling bank-leased investments.
Mr Venturato has been involved recently in marketing several centres and said the centres were favoured by investors who see comfort and security in the business of child minding.
"It is not a function that can be undertaken by a computer or online or offshore, which is a phenomenon affecting many Australian businesses at the moment," he said.
Burgess Rawson consultant Sam Newton said "family" investors were attracted by the security of government-funded places in centres. Recent sales included childcare centres at Wallan, Sunbury, Doncaster East, Sydenham and Hillside.
The venues with reasonably long leases and established operators generally sell for between $2 million and $3 million, at yields of between 7 per cent and 9 per cent.
"The fear factor surrounding the collapse of the Eddy Groves ABC childcare empire seems to have dissipated, with buyers recognising the industry is now more sound and a necessary service for many families," Mr Newton said.
Mr Venturato said that with increasing financial pressures on families and often both parents working, the demand for childcare services was increasing. He said the government subsidies towards childcare services also was a positive factor underpinning the performance of centres.
"The buyers will be attracted to childcare centres as awareness increases and especially among SMSF buyers who have accounted for more than half of the acquisitions of late," he said.
"Bank-leased investments have traditionally been hotly contested, but now\ childcare centres are rivalling the bank investments."
sjohanson@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
A low-interest-rate environment has pushed investors toward higher-yielding bricks-and-mortar assets. Properties such as petrol stations, convenience stores, bank chambers and childcare centres can deliver rental income and potential capital growth, making them attractive compared with low-yield cash investments.
Sales of 7-Eleven stores and service stations across Australia have raised more than $200 million in the past year, with transactions reported at yields of about 6% to 7%. Buyers included a mix of private investors and self-managed super funds (SMSFs).
Childcare centres appeal to SMSFs and family investors because they offer security—many places are government-funded—and the service cannot be offshored or fully automated. Rising demand for childcare, government subsidies and perceived stability have driven strong interest from SMSFs, which have accounted for more than half of recent acquisitions.
Childcare venues with reasonably long leases and established operators generally sell for between $2 million and $3 million, and recent sales have been trading at yields of roughly 7% to 9%.
According to market agents, childcare centre sale returns are now rivalling bank‑leased investments. While bank‑leased properties were traditionally hotly contested, childcare centres have emerged as strong alternatives for yield-seeking investors.
Recent childcare centre sales referenced include centres at Wallan, Sunbury, Doncaster East, Sydenham and Hillside.
The article notes that the fear factor from the collapse of the Eddy Groves ABC childcare empire has largely dissipated. Buyers now view the industry as more sound and a necessary service for many families, supporting renewed investor confidence.
Most investors prefer to own the land and install an operator to run the business. This structure provides rental income from the operator and potential capital growth on the land and property.
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