A Shell service station in the Sydney suburb of Randwick has sold at auction for $8.25 million, with a private buyer from the city’s eastern suburbs beating 13 other bidders to secure the property on a record yield of 2.55 per cent.

The property at 43-47 Frenchmans Road attracted a large number of inquiries during the sales campaign, with selling agents indicating that interest was likely boosted by a rare lease clause that requires the current operator Viva Energy Australia to remediate the site to its “highest and best use” at the end of the term – an appealing prospect for future developers.

“The auction attracted 14 bidders, reflecting the strong interest from investors, developers and owner-operators we fielded during the campaign. In the lead-up to the auction, we received 129 genuine inquiries from prospective purchasers who saw the potential for major future residential and commercial development,” JLL agent Dylan McEvoy said.

However, the co-agent Nic Simarro said that the new owner has no plans for commercial or residential development, instead indicating that they intended to renew the existing operator’s lease and retain the asset within the family as a long-term investment.

The initial net yield of 2.55 per cent was “a record for Sydney metropolitan service stations in the past three years”, Mr Simarro said.

The sale continues the recent bullish prices for service stations in Sydney’s east.

Mr Simarro sold a service station at 867-877 South Dowling Street in nearby Waterloo for $12.86 million in 2018, setting a 2018 record yield of 4 per cent.

The Randwick site was offloaded by Wenzhou Pty Ltd, which sold another service station in the Sydney suburb of Kingsgrove in 2016 for $5.06 million.

“They’ve held this [Randwick site] for a good 15 years,” Mr Simarro said prior to the sale. “They’ve been divesting their portfolio. [They] started with 26 and now they’re down to three.”

The 1245-square-metre site, on the corner of Clovelly Road and opposite Randwick’s main retail precinct, is 1.2 kilometres from the new light rail route, which is set to open within the next year.

Viva Energy Australia’s current lease term includes annual rental increases at a minimum of 3 per cent and up to 6 per cent, with the tenant responsible for paying all outgoings and land tax

Extracted from Commercial Real Estate