Private investors active in sub $10m service station market
Private Melbourne-based development fund PE Capital has exchanged contracts on the final portion of its Amstel convenience retail development in the south eastern growth corridor of Cranbourne.
The project incorporated a three lot subdivision with a total end value of circa $13 million.
A 7-Eleven anchored service station, which sold this week, represented the final piece of the puzzle after selling to a local family for $8.25 million, reflecting an initial yield of 5.47% based on the passing income.
The property incorporates a 15-year lease to 7-Eleven, a 10-year lease to Oporto and a new 10-year lease to Smokin Joe’s Pizza.
CBRE’s Victorian Freestanding Retail Investment team of Joseph Du Rieu, Kevin Tong and Mark Wizel negotiated the sale of the property, which attracted a broad spectrum of interest from local and national investors.
Mr Du Rieu said a variety of listed funds and syndicators were attracted to the investment’s long term leases to national operators 7-Eleven and Oporto, but they were priced out by the private investor market.
“Given the tenancy profile and price point, we consider this sale to be an excellent result for our client, PE Capital, particularly in the face of broader economic challenges in the first half of the calendar year,” Mr Du Rieu commented.
He noted that the limited number of new investments offered to the market each year was continuing to drive private investor demand towards newly developed fuel and fast food anchored retail developments, with new buildings offerering significant tax saving benefits, allowing investors to depreciate improvements over the lifetime of their ownership.
“Guaranteed rental increases of 3% per annum, combined with real estate’s unique ability to combine leveraging and depreciation to boost returns on investors’ equity, drove the buyer’s interest,” Mr Du Rieu said.
This is the third 7-Eleven-anchored investment the team has transacted in the 5% yield range this year, following 7-Eleven Windaroo for $6.3 million (5.95% yield) and 7-Eleven Werribee for $5.93 (5.04% yield).
CBRE’s Freestanding Retail Investment team is also bringing a similar investment property to the market in the Western Australian city of Albany.
“Given the brand new building and 15-year net lease to ASX listed energy giant Viva Energy, we anticipate the Shell in Orana, Albany, to be a highly sought after investment,” Mr Du Rieu said.