Sales to private investors highlight strong demand for secure investments at affordable prices.
Eight of the 30 properties in the $40 million national portfolio of leased childcare centres owned by Australian Education Trust (ASX: AEU) have sold ahead of auction, and several more are under negotiation, as private investors rush to secure the coveted sites.
The “Clever Investments” portfolio of centres, which have an average 10 year lease term, is being marketed by Colliers International, with agents reporting extremely high enquiry and several pre-auction sales since its launch three weeks ago.
Colliers International reports private investors have seen the benefits in the centres, which include long-term triple net leases secured by way of bank guarantees, annual rent reviews, tax depreciation benefits, and large land footprints providing the security of typically high underlying residential land values (STCA).
In South Australia, Colliers International Investment Sales Executive Oliver Totani reported that one centre in Port Pirie has sold, while another two are under negotiation and likely to sell prior to auction this week.
“Investors are particularly keen to take advantage of this opportunity and we are anticipating a similar result for the remaining properties,” said Mr Totani.
“The sales have been underpinned by the affordable entry point and coveted lease profile,” he said.
In Western Australia, four of the five centres on offer were sold at prices ranging from around $550,000 up to $1.1 million, at yields of approximately 8 per cent.
Colliers International Investment Sales Executive Trevor Hosiosky said the attraction of the assets was further enhanced by the level of government support provided to child care operators.
“The properties provide an institutional grade investment opportunity, at an entry level price, and with attractive yields. It’s unusual to find a mix of these strengths at this price level,” he said.
Two of the properties in Queensland have sold, both for in-excess of $1 million and showing sharp yields, confirming the demand for the sites and the attraction to investors.
In other states, one centre in Tasmania has sold for approximately $600,000, while several in New South Wales and Victoria have received offers that are under consideration.
Given the high level enquiry and strong pre-auction sales to date, Colliers International expects more properties to sell prior to auction, and strong competition for the remaining properties when they go under the hammer in auctions across the country starting this week.
While the resilience of the childcare sector was tested in 2009, it emerged with flying colours.
Strong population growth and low levels of unemployment are expected to continue to fuel demand in the sector.
Government studies indicate that for every dollar spent on childcare returns approximately $8.11 as a total economic benefit and also returns approximately $1.86 in taxes to the Federal Government.
The centres are being offered for sale individually, with auctions scheduled to commence on Wednesday 24 March in New South Wales and Western Australia and Thursday 25 March in Victoria and South Australia. Queensland’s auction is scheduled for 31 March.
