This article is from the Australian Property Journal archive
THE HealthCo Health and Wellness REIT has divested an Armadale childcare for $20.5 million, reflecting the sharpest yield for the asset type in Victoria since 2020, at 4.6%.
Tenanted by leading Victorian operator, Explorers Early Learning, the sale of 117 Kooyong Road is part of a broader asset recycling program by HealthCo Health and Wellness REIT, who transacted a total of $45.3 million in childcare divestments, for an approximate passing yield of 4.8%.
Sandro Peluso, Jimmy Tat and Marcello Caspani-Muto from CBRE’s australian healthcare and social infrastructure team brokered the deal.
“This is the sharpest yield witnessed for a Victorian childcare centre since 2020 when our CBRE team sold 1 Capra Court, Narre Warren at a record low of 4.25%,” said Peluso.
“With interest rates having risen 3.85% since, the Armadale transaction is a testament to the strong and unwavering investor sentiment toward the early learning sector, in combination with an appreciation for the value of existing centres in a rapidly rising construction cost environment.”
CBRE noted strong buyer interest from both domestic and international high-net-worth private group has driven an influx of international capital over the last six months, in addition to REITs looking to up exposure to social infrastructure real estate.
“While domestic interest has remained strong our teams’ last six months of childcare and social infrastructure-related investments has seen circa 70% of properties sold to international capital. This is not a trend we expect to slow in the short term,” said Tat.
“Australia’s immigration numbers are also acting as a fundamental driver for investors. The substantial influx forecast is expected to positively influence the property market more significantly than interest rates. With increasing immigration rates and forecast interest rates reductions in 2024 there will be a major uplift in demand with limited supply already choking the markets.”
HealthCo announced the asset recycling program when it acquired the Healthscope Hospital Portfolio in March this year.
“The Armadale property and all other assets currently under negotiation are located within established suburbs of Melbourne meaning underlying land values are high. When you couple this with rising construction costs at yields between 4.5%-5% and factor in leasing risk allowances, transactions are not occurring a far stretch from replacement cost,” added Peluso.
“There is a reason many large-scale investment funds have stopped development in the short term because they are acutely aware of the risk associated.”
