This article is from the Australian Property Journal archive
HISTORIC Port Melbourne pub The Exchange Hotel was sold for $8.92 million as investors splashed out $76 million on commercial property over two days at Burgess Rawson’s latest portfolio auctions in Sydney and Melbourne.
All but two of the sales took place at the larger Melbourne event, which saw a clearance rate of 80%, or 20 out of 25 properties, with the average yield coming in at 4.86%.
This week’s edition will be rounded out tomorrow at the Hilton Brisbane.
Nearly 150 bidders filled Crown Casino’s River Room yesterday to see a private investor buy the 106-year-old Exchange Hotel on a 4.63% yield. Australia’s second-largest hotelier, Australian Venue Co has a lease running to 2031 with options to 2051.
The highest value sale was a medical centre in Elsternwick, nine kilometres south-east of the Melbourne CBD, for which a private investor forked out $9,850,000 on a 4.82% yield. The 1,340 sqm site opposite Caulfield Hospital has a brand-new 15-year lease to a multi-disciplinary medical clinic.
Burgess Rawson’s Beau Coulter said investors seeking certainty continued to actively compete on medical centres, childcare centres and freehold retail assets.
“The longer average weighted average lease expiry (WALE) demonstrates investors avoiding short-term volatility and banking on long-term property trends,” he said, noting that the average yield at Burgess Rawson’s portfolio auctions has compressed 102 basis points since the June portfolio auction to 4.86%, while the official interest rate has gone up 150 basis points in that time.
The average WALE at the Melbourne portfolio auction was 10.7 years, which was 35% longer than the last portfolio.
“Sophisticated property investors look to stabilise with established investments and underpinned land value in volatile markets. This has led to further compression in yield for that we have seen today.”
Sales achieved an extra 7% over reserve, with five properties sold at 20% or greater over the reserve price.
The attraction of long-term leases was demonstrated in bidding for a Journey Early Learning centre in Templestowe Lower, offered with a new 12+10+10+10-year net lease to 2064 and which sold for $3,450,000 on a yield of 5.01%.
Among the most hotly contested properties was the Sunshine United Petroleum station, which sold after 27 bids for $3,150,000 on a sharp yield of 2.97%, while the hammer fell on Autobarn in Mornington at $5,400,000 after 35 bids, achieving a yield of 3.77%.
At Tuesday’s Sydney auction, a freehold medical centre in Sydney’s south west with a long-term, established tenant sold for $10,000,000 on a 4.79% yield.
“Medical centres and other essential service assets with established, long-term tenants have performed exceptionally well over the past two years and we see no signs of this slowing,” said Burgess Rawson head of agency NSW, Yosh Mendis.
