This article is from the Australian Property Journal archive
WITH demand still high for childcare assets, Charter Hall Social Infrastructure REIT has successfully sold three centres across NSW and South Australia for a combined $27.9 million.
In the largest childcare transaction in Australia this year and the largest in NSW since 2019, the REIT sold a centre in Cremorne, NSW for $18.5 million on an initial yield of 4.7%.
The Cremorne centre at 15-19 Parraween Street, which was converted from its original office usage in 2013, is leased to Only About Children with a 14-year weighted average lease expiry, with a current passing rent of $866,826 and fixed annual increases. CBRE’s Australian Healthcare and Social Infrastructure Team of Sandro Peluso, Marcello Caspani-Muto, Jimmy Tat, Toby Silk and Angus Beevers managed the expressions of interest campaign.
Tat said a clear trend of heightened investor interest in the asset class, leading to several larger-sized deals since June last year with prices ranging from $12.5 million to $20.5 million.
“There has been steady interest from domestic and international buyers in the past 18 months, but we are seeing an increased appetite for high-quality childcare assets from international groups. This is reflected in increased sale prices for the asset class and this campaign was no exception,” Tat said.
“While we had a greater number of high-net-worth domestic investors than international investors who engaged during the campaign, the international buyers were willing to go to a pricing to level that few local buyers were expecting.”
Peluso said, “Given the prime location and average annual growth in land values for the area, this was more than a standard passive childcare investment opportunity.”
Recent major childcare sales managed by the team include 117A Kooyong Road in Armadale for $20.5 million, 47 Dendy Street in Brighton for $17.5 million, on a 5.19% yield, and the Explorers Early Learning centre at 86 Springvale Road in Nunawading for $12.5 million, on a 5.3% yield, all in Melbourne. In other deals, an offshore Chinese investor made their first foray into childcare centre investment sector in June with the $9 million purchase of an Essendon centre, and HealthCo HealthCare and Wellness REIT had a Concord asset snapped up for $13.2 million within seven days of the marketing campaign kicking off.
Private investors recently snapped up $28 million worth of Queensland childcare centre assets across four off-market deals, with active fund manager Clarence Property the vendor of two of the centres. That included the $9.83 million sale of Journey Early Learning Centre in Carseldine, north of the Brisbane CBD on a yield of 5.18%.
Meanwhile the REIT’s second NSW-based divestment was the $7.2 million sale of a centre in South Coogee on an initial yield of 4.6%.
While in South Australia, the REIT divested a centre in Linden Park for $2.2 million on a initial yield of 2.8%. With the sale pulling in high levels of buyer enquiries throughout the campaign.
The $27.9 million in sales came in at an average yield of 4.5% and reflected a 4.8% premium to book values as at 30 June 2024.
“The continued liquidity of childcare assets in a higher interest rate environment is testament to the resilience of this sector, reflecting its essential nature, ongoing government support, and broad investor appeal given the generally lower price bracket,” said Travis Butcher, fund manager at Charter Hall Social Infrastructure REIT.
“CQE continues to execute on its portfolio curation strategy with the proceeds of these sales being applied to debt reduction.”
The divestments come after the REIT posted a statutory loss of $19.6 million for FY24, with its portfolio independently valued at a passing yield of 5.2%, resulting in a 2.2% or a $48.5 million decline on like-for-like June 2023 book values.
Over the FY24 period, childcare asset divestments totalled $40.0 million at a yield of 4.7%, with 12 childcare assets offloaded at a premium of 4.1% to previous book value.
Burgess Rawson managed the sales in Linden park and South Coogee.
