Sell-out auction session sets records for child centres

Childcare centres in inner-city Sydney and in Brisbane have sold for record prices and yields at auction as cashed-up investors pay up for exposure to essential service-style commercial property.

The two childcare centres were part of a sell-out portfolio auction session run by Cushman & Wakefield on Monday, with seven out of seven commercial properties listed sold, raising close to $44 million and about $4.6 million ahead of reserve.

Among the highlights was the sale of the Lilyfield Early Learning Centre for $14.35 million on a 3.83 yield. In Sydney’s buzzing inner west, the centre has a 20-year lease running to 2041, with further options to 2061.

Returning $550,000 annually, it is one of the only inner-city Sydney childcare centres to come onto the market in many years.

Further north, the Darra Kids Club Childcare Centre in Brisbane sold for $7.75 million, on a 4.9 per cent yield. The newly built, two-storey 105-place facility, has a new 15-year lease to 2036 with a net annual income of $379,598.

Both the Sydney and Brisbane centres changed hands at the highest prices and lowest yields yet struck at auction in their respective markets, said Cushman & Wakefield’s head of investment sales, Michael Collins.

“It tells us about the strength of the childcare market,” he said.

“Investors are happy to put their money into these asset classes because of the strength of the tenant business. It’s an essential service.

“The federal government has supported childcare significantly during COVID-19. It is an industry which is one of the most bullet-proof.”

Adding appeal to the Li1yfield centre, which is just three kilometres from Sydney’s CBD, is its large real estate footprint, which takes in seven property titles.

“You’d be hard-pressed to find seven titles in Lilyfield that you could add together and replicate this asset,” Mr Collins said.

Also changing hands on a tight 3.77 per cent yield was a brand new Taco Bell at Tamworth which sold for $4.77 million. on a 3.77 per cent yield. A Hungry Jack’s at Muswellbrook sold for $3.46 million on a 4.5 per cent yield.

Two of the properties sold before the online auction began: a Subway and Gloria Jeans at Mackay, which changed hands for $3.9 million on a 6.05 per cent yield and a G8 childcare centre at Cessnock, which traded for $6.005 million on a 5.12 per cent yield.

“It’s a super strong market,” Mr Collins said.

“We’ve seen no deterioration in investors’ appetite to buy commercial investment property over the last three or four months. In fact, it has increased. People are looking for returns on their capital.”