This article is from the Australian Property Journal archive
ASSEMBLY Funds Management, backed by the Lowy Family Group, has picked up six childcare centres in Sydney’s growing north west corridor for $42 million, encouraged by the defensive qualities and comparatively good value of assets in the sector.
The portfolio was acquired by Assembly (AFM) in partnership with Harrington Property Funds Management (HPFM), and will be held in Assembly’s opportunistic fund APDF1.
The six centres are located in Marsden Park, Riverstone, Schofields, Box Hill, and two in Woodcroft, and provide a total of 452 places. They will be operated by Young Academics Child Care on new 15 year leases. Young Academics currently operates another 15 centres across the Sydney metropolitan area.
Tim Meurer, AFM’s head of transactions, said the “risk-reward balance of this transaction in the alternative asset class is appealing to the fund at this time”.
“Childcare has proven to be a highly resilient asset class in the face of economic turbulence and offers good value in a low-yield macroenvironment.
“By comparison, the direction of other asset classes such as traditional retail, commercial and leisure is less certain while industrial and logistics are heavily sought-after and comparatively expensive,” he said.
Peter Fanous of Peritus Childcare Sales brokered the transaction following an international expression of interest campaign that he said received interest from across Asia and Australia including major national operators, global private equity firms and family offices, attracted to the fundamentals which support the asset class both at the OPCO and PROPCO level.
“At a macro level, childcare as an asset class has well and truly established itself as an institutional asset class alongside the traditional office, industrial and retail asset classes,” Fanous said.
HPFM director, Trevor Byles said the early learning sector is well placed for long-term growth having the benefit of bipartisan government support, and that freehold ownership of early learning centres will become more consolidated by institutional capital as the sector matures. Listed group Home Consortium has picked up childcare centres for its next spin-off trust, as has it its recently floated Daily Needs REIT.
Assembly active
Assembly last year partnered up with Cadence Property Group to make another key defensive asset purchase – a large format retail centre in Melbourne’s western suburbs. The rebranded Sunshine Square centre is undergoing refurbishment and new leasing agreements with Harvey Norman, discount department store chain Cheap as Chips, and Total Tools have extended the weighted average lease expiry from two years to five, and taken the property yield to circa 7%.
Sunshine has recently been announced as major beneficiary from the Melbourne to Tullamarine airport rail link and the Melbourne suburban railway loop project. Buoyed by the infrastructure investment in the region, ADPF1 acquired a nearby two hectare site in the area.
It also successfully realised a $17.5 million senior debt loan on a residential development in Sydney’s north west and redeployed the funds into a nearby residential development.
The acquisitions and divestments take the fund’s equity commitments up to $141 million, leaving it with over $60 million in equity to complete other transactions now in final due diligence. It has more than $240 million in assets under management.
APDF1 has now raised $207 million with a target final equity size of $325 million, according to AFM chief executive Michael Gutman.
“With the majority of its equity likely to be committed shortly it is anticipated the fund will be seeking new equity investment in the next few months.”
Assembly completed a second equity raising of $53 million in December.
