Buyers keep powder dry at Melbourne portfolio auction
Investors came hard for a KFC outlet in suburban Melbourne but many sat on their hands at a quiet Burgess Rawson investment auction on Wednesday.
While buyers on Tuesday snapped up 15 of 18 properties on offer at a corresponding auction in Sydney, it was a different story in Melbourne, where eight of 16 properties sold, though two of the unsold properties found buyers after the auction.
Buyers went head to head for a the day’s trophy property, a KFC in Altona North, with protracted bidding driving the price up to $5 million and the yield down to just 3.72% – a record for a KFC store. A private Chinese investor was the successful bidder.
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The restaurant, on busy Millers Rd, is leased to the fast food giant until 2026, with options for a further 30 years, and drew bids from a number of interested parties after attracting more than 100 enquiries prior to the auction.
Burgess Rawson agent Scott Meighan says some buyers had been waiting months for the chance to buy another KFC.
“A lot of them enquired about the Deer Park KFC we sold at our May auction,” he says.
“That particular block of land, it’s 3620sqm, a freehold title, Altona North … and there’s significant underlying land value there, and that’s probably why the yield was driven further down than anything we’ve ever seen before in this particularly fast food investment market.”
“It was the lowest ever (yield) for a KFC, I know that for a fact.”
“There’s not enough of these triple-A tenanted investments with long-term leases. We just don’t know when the next one’s going to come up. It’s a very good time to be a seller – we just can’t satisfy the demand.”
But the next five properties on offer were unable hit the mark, with an IGA in Footscray passed in after a vendor bid of $2.7 million and a pair of 7-Eleven service stations at Marcoola on the Sunshine Coast and at Carrum Downs in Melbourne’s south-east passed aside at $4.4 million and $4.5 million, respectively.
A Subway takeaway outlet that sits alongside the Marcoola 7-Eleven found a buyer for $1.78 million on a 7.06% yield, while a Toyworld store at Noosaville in Queensland was bought for $1.03 million on a 7.04% yield.
An investor paid $1.95 million for a facility leased to National Tiles at South Morang, after auctioneer David Scholes exercised a vendor’s bid at $1.949 million.
A retail and garden centre at Howrah in Tasmania went for $2.31 million on a 9.79% yield and two neighbouring properties near Townsville in Queensland were sold for $990,000 and $1.08 million.
A commercial space leased to the Melbourne City Ballet on the grounds of the old Pentridge Prison in Melbourne was passed in at $1.95 million but was also sold after auction.
Childcare centres continue to be an investor favourite, with a centre in Dubbo, New South Wales, selling for $5.215 million prior to auction.