A government-owned service station in Sydney’s Waterloo has sold for $12.86 million, receiving more than 100 bids in the process.

It was part of a portfolio of four service stations, being sold by the South Australian government-owned investment corporation Funds SA, for more than $33 million.

The sites are located in Waterloo, Narellan and two assets in Greenacre, with all properties sold to private investors.

The most expensive property occupies 3724 square metres at 867-877 South Dowling Street, in Waterloo and sold for $12.86 million on a sharp 4.05 per cent net yield.

Bidding opened at $9 million on that site, which has three street frontages including 90 metres on South Dowling Street.

It received the most interest thanks to its proximity to Moore Park and zoning for mixed-use development.

JLL’s Nic Simarro, who sold the service stations with Harry Sullivan, said nine bidders competed for an hour for that property.

“The sale price achieved was above reserve, representing a yield of 4 per cent,” Mr Simarro said.

“Some 170 inquiries were received during the auction campaign from investors attracted by the future residential development prospects of the high-profile city fringe site.”

Inquiries for the property, which generates net rents of about $521,000 a year, came from across Australasia.

One private investor bought both assets in Greenacre, at 9-11 Roberts Road and, about 300 metres away, 74 Roberts Road, for $7,365,000 and $7,675,000 respectively.

Both are about 3700 square metres in size and were bought on 5.4 per cent net yields.

The Narellan service station, at 287-293 Camden Valley Way, sold for $5.46 million on a 5.55 per cent yield and is also on 3700 square metres.

All four sites are head-leased to Viva Energy – the supplier of Shell fuels – which pays all outgoings and land tax. Each location also sub-leases space to Coles Express and a fast food outlet.

The four properties were purchased for a combined $8.3 million in 1994 to 1996, Domain Group records show.

Investments in regional areas are also expecting strong prices, with two unbuilt petrol stations on the M1 Pacific Motorway between Wyong and Newcastle in NSW tipped to sell for more than $15 million for the two sites.

It is anticipated that the pair, in Cooranbong and Dora Creek, will be worth $85 million when the project is completed, with an annual income of about $5 million.

Investors have favoured alternative assets – such as data centres, student accommodation and service stations – in 2018 as yields for core assets compress.

Capital flowing into Australian real estate is expected to grow at more than 7.5 per cent a year, despite the supply of core property assets projected to grow by 4 to 5 per cent annually at best, a JLL report on alternative assets shows.

“Consequently, investors will be faced with three choices: (a) continue to pay more for core real estate, (b) go offshore or (c) find new ‘alternative’ real estate sectors to invest in,” the report found.

“The most likely outcome will probably be a combination of all three options, but we believe that there is little doubt that institutional investment will have to move into new sectors long-term.”

Extracted from Commercial Real Estate