This article is from the Australian Property Journal archive
ONE of Victoria’s largest childcare centres has changed hands for $12.8 million in another major deal for the sector in the state.
The Explorers Early Learning centre at 86 Springvale Road, Nunawading in Melbourne’s south sold on a yield of 5.3%. It operates with 154 children consistently near capacity and has a 15-year lease term plus options attached.
The sale comes just a few weeks after the $17.5 million sale of a childcare centre in upmarket Brighton set a new benchmark for the sector.
Both deals were struck by CBRE’s Australian healthcare and social infrastructure team of Sandro Peluso, Jimmy Tat and Marcello Caspani-Muto. They have managed the four largest centre sales across Australia in the past 12 months, with deals across Victoria and Queensland.
Peluso said buyers have accepted where the cash rate is and have no immediate views they will be declining in the short term.
“Sophisticated investors are looking beyond short-term yields and the immediate cost of debt to recognise the incredible short-term buyside opportunity which exists in the marketplace.
“It’s not just about surface-level analysis anymore, investors are analysing multiple factors such as depreciation, replacement cost and run a comparison of the return on their money in the bank vs investing in childcare centres.”
Assuming a standard childcare LVR of 60%, assuming suitable ICR coverage, benchmark returns from 15% to 30% greater on investors’ capital are being seen for newly built centres once factoring in depreciation, he said.
Tat said “the money is there” but it is “more challenging to engage buyers to act and overcome much the negative commentary they see in the media than it has ever been”.
Also in Melbourne, a Bentleigh childcare centre has just changed hands for more than $6.7 million, on a 4.7% yield. It is occupied by Evolve Early Learning.
