Retailer United Petroleum has sold two suburban Melbourne petrol stations on yields below 5 per cent to private investors in separate deals.

United received a combined $18,460,000 for the service stations in Doncaster East and Preston, reflecting the value of investments underpinned by long leases in in-demand residential areas, said JLL director of retail investments Stephen Bolton, who sold the assets with colleague Stuart Taylor.

“The assets presented passive investors with a secure and long-term income growth opportunity and potential for long-term development upside in two of Melbourne’s most sought after residential, commercial and development suburbs,” Mr Bolton said. “Low yields are continuing to be achieved within the sector with these results further supporting the ongoing yield compression for prime retail investments in the Melbourne market.”

Demand for petrol stations is strong. On Tuesday, a United Petroleum site at 262-272 Victoria Road in Rydalmere in Sydney’s west, sold for $5 million on a 4.4 per cent yield at the Burgess Rawson auction. Newly listed Viva Energy REIT, the $1.8 billion-owner of 425 petrol station properties surged 18 per cent in its first week of trading after its ASX debut in August. It has since come back, but remains 5 per cent up.

Both sites United sold came with 20-year triple net leases to United Petroleum, with lease options until 2056.

The 3871-square-metre site in Preston, in Melbourne’s northern suburbs, sold for $11,110,000 with a 4.45 per cent initial yield. The site, on the corner of Bell Street and Albert Street, has passing traffic of 70,000-plus vehicles daily and also had a 15-year lease to Hungry Jacks.

The Doncaster East United Petroleum service station and convenience store sold for $7.35 million with an initial 4.69 per cent yield. The site is on the “homeward” bound side of 183-185 Reynolds Road, Doncaster East, 19 kilometres from the Melbourne CBD and adjacent to Stockland – The Pine regional shopping centre.

Extracted from Australian Financial Review.