The 7-Eleven group has generated more than $78 million from a sell down of 15 properties located around the country – a strong start to real estate firm Burgess Rawson’s biggest auction week of 2019.
The properties were all sold under a sale-and-leaseback arrangement to the convenience retailer, with new 12-year lease agreements in place.
Headlining the results was a service station with a McDonald’s sublease in the Melbourne suburb of Campbellfield, which fetched $8.52 million on a yield of 4.54 per cent.
The next highest result was for a site in Braddon, in Canberra, which sold for $7.1 million.
The cheapest property sold on the day was in Toongabbie, in western Sydney, which sold for $2,985,000, while the lowest yield, of 3.82 per cent, was set by a property at 95 Elizabeth Drive, Liverpool, which fetched $5.75 million.
Only one property sold for less than its reserve price, according to Burgess Rawson Melbourne director Billy Holderhead, with the remainder selling “well above”.
Mr Holderhead said that demand was always strong for properties tenanted by a company with a national profile, but current financial conditions and the structure of the leases had further buoyed buyers.
“It’s fair to say that pricing between $3.5 million and $7 million is the real sweet spot in the market and the results definitely had a lot to do with that affordability factor,” he said.
“With a good lease and a good tenant with a good story, I really don’t think things have ever been better for this sort of property. Anything with a simple, set-and-forget lease structure in this environment is highly sought after.”
Each lease had set compounding 3 per cent annual increases and four additional five-year options.
The majority of buyers were private investors, with some properties purchased through superannuation funds, according to Burgess Rawson director Simon Staddon.
Bids came from several Burgess Rawson offices across the country and location was no barrier to buyers, with bidders who lost out on earlier properties bidding again at subsequent auctions.
“When push came to shove in the auction room they couldn’t resist having a go at something else,” Mr Staddon said.
“There were parties who made multiple bids on up to four properties – because of the similarities between properties it didn’t matter where they were located.”
Nobody made multiple purchases on the day but the buyer of the Liverpool property already owns another 7-Eleven service station, Mr Staddon said.
Results from the Melbourne portfolio auction, which followed the service station auction, included a shop leased to First Choice Liquor Market in Melbourne’s Werribee, which attracted 26 bidders and sold for $7.75 million.
A Woolworths-leased asset in the regional Victorian town of Seymour fetched $15.42 million, on a yield of 5.19 per cent.
Food and beverage to feature in Sydney
Burgess Rawson’s second day of auctions will take place on Thursday, October 31, at Doltone House in Sydney.
Food and beverage properties including a listing at 1260 Princes Highway, Engadine, and 481 Crown Street, Surry Hills, are tipped to perform well, according to Burgess Rawson agent Tom Doran.
“We are expecting strong bidding from astute investors who are looking to secure a slice of the food and beverage market, with a Subway and BWS at Engadine, a vacant eatery offering in Sydney’s Surry Hills and a trophy restaurant further afield in Taree all solid contenders,” Mr Doran said.
An ‘East Pizza’ restaurant in Kingston, ACT is also set to go under the hammer.
“The demand from investors to add food and beverage outlets to their portfolio is fuelled by the reputable operators and robust lease arrangements that come with this asset class,” Burgess Rawson’s Dillon Frain said.
Other properties on the auction list include a Westpac at The Entrance, on the NSW Central Coast, a NAB branch in Cooma and two childcare centres in Horningsea Park and Leumeah.
Extracted from Commercial Real Estate