A standalone McDonald’s with price expectations above $2.5 million is already attracting strong buyer interest ahead of Stonebridge’s October portfolio auction next week.
The fast-food property in Australind, WA has a 15-year lease that ends in 2027 with options to extend to 2047 plus rent increases pegged to inflation. Standalone fast-food outlets are the most popular asset class amongst private investors, according to Stonebridge partner Tom Moreland.
“I think people are naturally drawn to the McDonald’s brand. Obviously it’s been such an iconic brand at a global level, that drives the interest and I think everyone’s got an appreciation for how well it trades as a business,” Mr Moreland said.
The 3395sqm McDonald’s is one of ten properties on offer with six in the Stonebridge portfolio to be auctioned and the remaining four properties to be sold via expressions of interest campaigns. The properties on offer include fast-food outlets, childcare centres, petrol stations, a large format retail store and one neighbourhood shopping centre in Merimbula, NSW.
“Scarcity is the key” to strong buyer interest in the Australind McDonald’s outlet as is the premium fast-food brand itself, buyer’s advocate and Rethink Investing founder Scott O’Neill said.
“It’s a good asset, lots of car spots, the freehold corner location. As an investor that ticks all the fundamentals, as long as it’s not a flood zone or anything like that,” he said.
Also included in the auction is an Imagine childcare centre in Gunnedah leased up to 2037 with options to extend and rent increase pegged to the higher metric of 3% or the current inflation rate. Melton Montessori with a lease to 2059 and 5% fixed rent increases is being sold via expressions of interest campaign as is the yet to be completed childcare centre in Pakenham.
Mr Moreland said childcare centres remain on investors wish-lists as they are generally rented out to well established operators and the government’s unwavering support to the industry has driven interest in this sector.
“They are seen as a very long-term defensive asset class that provides long term leases, to tenants that have a really strong and stable business model,” Mr Moreland said.
The market has seen high sales activity around childcare centres due to the increasing demand young families around country have for early learning centres, PropTrack economist Angus Moore said.
“While we obviously saw some disruptions to childcare during the pandemic, we’re still seeing strong demand, supported by expanding government support and subsidies for early learning and childcare,” Mr Moore said.
Mr O’Neill said the AMX superstore in Morayfield which is also on offer at the auction would be “a popular asset” as large format retail stores had been one of the few beneficiaries of the pandemic.
“Because people are spending more money on vehicles and hobbies and in this case, motorbikes,” he said.
The two petrol stations on offer include a United Petroleum truck stop in Mackay due to open in December and a Woolworths Caltex in Australind, WA. Investor interest in petrol stations remains strong Mr Moreland despite concerns that electric vehicles may render some sites redundant over time.
“The service station as we know it will continue to evolve as things like electric vehicles begin to take shape. And I think certain investors acknowledge that whereas others are potentially more gun shy at the moment,” Mr Moreland said.
Mr O’Neill said interest in petrol stations among his client base was split between those who know the industry and can see development potential in some sites and other buyers who worry that in 15 years’ time the country won’t need as many outlets as currently exist.
Mr Moreland said Stonebridge had “yet to see any material drop off” despite interest rates rising by 250 basis points since May.
“With rising interest rates, we expect yields for more expensive assets to push up slightly but just the sheer level of competition for assets such as this McDonald’s has kept the market quite buoyant up until this point in time,” he said.
Mr Moore said there was still “plenty of capital looking to invest” and demand for commercial property is likely to remain strong.
“But we might see a rebalancing away from riskier commercial property types in favour of more resilient asset types, like industrial and childcare that have a bit lower risk and the potential for higher rent growth,” he said.
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