Oil really is liquid gold for savvy investors snapping up regional petrol stations across Australia, as the sector looks set to finish off 2016 with a gusher, resulting in more than $171 million worth of sales.

Demand for the properties is high with owners being able to generate cash from the sale at the petrol pumps as well the more lucrative retail component. Some sites are now being snapped up more for the retail expansion possibilities.
Over time the larger properties will offer fast food and convenience shopping as the attraction, rather than merely for fuel.

Reflecting the demand for the emerging asset class is the recent successful listing of the VIVA Energy REIT, called the largest real estate investment trust float in ASX history.

Colliers International undertook a national Valuation exercise of the 425 freehold service stations in the Trust, each operated under the Shell Coles Express brand, with Anthony Mylott of Colliers International confirming a total portfolio value in excess of $2 billion.

There is also the ongoing speculation that Woolworths will be announcing the sale of their petrol station business. No buyer is confirmed yet but Caltex and BP are rumoured to be circling.

“The REIT was very well received by the market, with investors attracted to the long term triple net leases to Viva Energy Australia, with lease terms of between 10 and 18 years. The success of the Trust, the first of its kind, highlights the strength of the service station sector nationally, with long term annuity-type investments keenly sought by the wider market,” Mr Mylott said.

One of the latest sales was by APN Property Group, of the South Nowra Service Centre, which was ahead of auction, to a private Sydney investor for $11.32 million.

The sale was on a record net initial yield of 5.09 per cent, through James Wilson, Harry Bui and Alexander Elliott of Colliers International.

The newly completed service centre at 190-198 Princes Highway, South Nowra comprises two separate lots across 7,012 sqm and is home to a freestanding Hungry Jack’s restaurant and a Shell Coles Express with an attached Subway restaurant. The properties benefit from long term leases of 15 years.

According to Mr Wilson, this result highlights the strong appetite for retail investments with long lease terms to quality tenants with the sale eclipsing the previous sharpest yield for a service centre nationally.

“The sector has traditionally been popular with mum and dad investors as many service station investments are a small enough quantum of dollars to be placed in self managed super funds or family trusts. More recently though, more sophisticated investors have begun entering the market, with the secure lease tenure and defensive nature of quick service restaurants proving difficult to ignore,” Mr Wilson said.

Other deals include Colliers International Harry Bui’s sale of the 7 Eleven service station in the Central Coast suburb of Toukley to a private investor for 6.15 per cent at $4.8m plus a Woolworths Service Station in Sydney’s North West growth corridor suburb of Kellyville which sold for $9.4 million, representing a 5 per cent yield through Stuart Taylor and Dylan McEvoy of JLL.

A brand new service station, leased to 7-Eleven and KFC, will also be auctioned on November 8 as part of Colliers International’s National Auction Portfolio. The property, located at 190 Eumundi Road, Noosaville, will be auctioned by Nick Dowling and Harry Bui of Colliers International on behalf of the vendor Empirica, with a price guide in excess of $10 million.

United Petroleum, the country’s biggest independent fuel retailer, was also a winner across two days of the recent Burgess Rawson portfolio auctions, selling all six service stations on offer under the hammer with combined sales of $32 million.

Extracted from Sydney Morning Herald