Hungry investors snap up fast food properties in end-of-year auctions

Investors have toasted a Dan Murphy’s liquor store, savoured a drive-through Starbucks and devoured a Red Rooster, KFC, Hungry Jack’s and McDonald’s in end-of-year commercial auctions totalling about $160 million.

Burgess Rawson sold $100 million of commercial properties in its final Melbourne and Sydney portfolio auctions for the year while Cushman & Wakefield’s December portfolio auction fetched $58.8 million.

Childcare centres and service stations were also snapped up amid strong demand from private investors for alternative investment assets, a trend expected to continue in 2021.

“Given their focus on yield, high-net-worth investors continue to aggressively target commercial property investments with long-term leases to blue-chip tenants in resilient industries,” Cushman & Wakefield’s head of national investment sales Michael Collins said.

“The Reserve Bank of Australia has signalled that interest rates are likely to remain low for the next three years, so we expect demand for alternative assets will build into 2021 as investors seek higher yielding, defensive investment opportunities to bolster their portfolios.”

A Dan Murphy’s liquor store in Sydney’s Gladesville was a big drawcard for investors, given its 15-year lease to 2030 and options to extend for a further 40 years. It sold for $10.8 million in Burgess Rawson’s Sydney auction on 8 December.

The $10.8 million sale of this Dan Murphy’s store in Gladesville, NSW topped the big results in end-of-year commercial portfolio auctions. Picture: realcommercial.com.au/sold

Fast-food properties with long-term leases to well-known brands proved to be popular.

The Dee Why KFC in Sydney sold for $7.22 million on a 3.43% yield in Cushman & Wakefield’s 10 December auction. A Hungry Jack’s in Queensland’s Springfield fetched just over $5 million and a McDonald’s in Scone in NSW sold for $5.8 million.

Cushman & Wakefield associate director Yosh Mendis said high-net-worth investors continued to be drawn to fast-food properties in strategic locations leased to tenants like McDonald’s, KFC and Hungry Jack’s.

“These assets were heavily bid on, particularly given the fast-food sector’s proven ability to trade strongly through the pandemic,” Mr Mendis said.

High-net-worth investors have been drawn to fast-food restaurants leased to big names like McDonald’s. Picture: realcommercial.com.au/sold

There was also robust bidding for a Red Rooster restaurant in Rockhampton in Queensland in the Burgess Rawson Melbourne auction on 9 December.

Burgess Rawson director Raoul Holderhead said there were 90 bids, including 59 bids of $1,000 before the restaurant sold for $3.04 million at a yield of 5.65%.

A Melbourne-based investor sent bids via Chinese messaging app WeChat while in hotel quarantine in Beijing during the Burgess Rawson auctions, which featured several service stations amid strong demand for the asset class during the pandemic.

“In a marathon auction, they successfully secured the United fuel station in Cranbourne North for $7.3 million,” Mr Holderhead said.

An investor in a quarantine hotel in Beijing used WeChat to successfully bid for this outer Melbourne service station. Picture: realcommercial.com.au/sold

Mr Holderhead said Burgess Rawson also sold its first property via online bidding, with a Brisbane bidder buying a Sparkles Car Wash at Berrinba in Queensland for $1.64 million.

It was one of three new properties in the same Berrinba block that each sold for well above reserve, Burgess Rawson said. The drive-through Starbucks sold for $3.75 million at a yield of 4.2%, while a Bridgestone tyre shop sold for $2.265 million.

There was also strong interest in childcare centres, which Cushman & Wakefield associate director Tom Moreland described as an asset class of choice for investors.

“Investor confidence is high given the government support the sector received during the earlier stages of the pandemic, and we have witnessed yield compression of around 25-50 basis points over the past three months,” Mr Moreland said.

Childcare centres have been attracting interest from investors. Picture: realcommercial.com.au/sold

Seven childcare centres in New South Wales and Queensland sold individually for a total of $23.79 million with average yields of 5.5% in the Cushman & Wakefield auction. The results included $5.5 million for a centre in Greater Brisbane’s Thornlands and $4.18 million for a centre in Campbelltown in south-western Sydney.

Burgess Rawson director Adam Thomas said two childcare properties sold for well above reserve in its Melbourne auction: a Cranbourne West centre for $6.91 million with a yield of 5.58% and a Melton centre for $2.64 million.

“Demand for childcare assets continues to build momentum, and we anticipate more of the same next year,” Mr Thomas said.

Ray White Commercial head of research Vanessa Rader said the buyer profile in the sub-$50 million commercial property market was heavily skewed to private investors this year, given the low interest rate environment.

“There remains a high demand for income-producing assets by private buyers looking to diversify in the quest to achieve greater returns than the current low bond yields,” Ms Rader said.

“This resulted in assets such as childcare, medical, service stations, blocks of units and boarding houses growing their buyer pool with high demand keeping investment yields low.”