This article is from the Australian Property Journal archive
INVESTORS are being drawn to new generation boarding houses (NGBH) in New South Wales, as agents JLL racks up $85 million of sales in the sector.
JLL’s most recent sale of a 35 double-room NGBH at 12 Bank Street in Meadowbank reaffirms a growing investor focus on the asset type, after bringing in $10.5 million.
NGBH properties are a build-to-rent asset made up of freehold blocks of studio apartments, typically offered fully furnished and up to around 35sqm, often with lease terms from three to 12 months.
The 12 Bank Street property, which sits within close proximity of Meadowbank Train Station and Wharf, comprises fully furnished self-contained studios and is currently at 100% occupancy.
Gordon McFadyen and Dylan McEvoy from JLL’s capital markets NSW team managed the sale of the site via an expressions of interest campaign.
“Investor demand is driven by high-net-worth private groups, owner operators and fund managers. Developers are also investing in boarding houses because of the low establishment costs and the ability to provide cash flow while they build other projects,” said McFadyen.
JLL’s $85 million in sales of the asset type spans 228 units with 98% occupation, supplying investors with secure returns.
“NGBH assets have consistently performed during 2020/21, and throughout pandemic uncertainty. Excellent tenant appeal and retention is based on high-quality design, construction and the convenient accommodation solution it offers to the rental market,” said McEvoy.
In addition to these transactions, JLL reports an increasing pipeline of deals in Sydney including going concern investments and DA approved sites.
“There is a new capital focus on NGBH as they are cheaper and quicker to build than a residential unit block, they can offer land tax concessions, going concerns generally transact on a 4% – 5.5% net yield and it is possible to achieve scale in this sector to build a portfolio of assets,” said McFadyen.
In 2021, JLL’s NGBH sales have so far included 94-96 Croydon Street, Lakemba year for $7.9 million, 12 Bank Street, Meadowbank for $10.5 million and 187 Warringah Road, Beacon Hill under contract with price guidance approximately $7 million.
