Childcare market faces first 2019 test at portfolio auctions

The childcare centre at Wulguru will be auctioned later this month.

Childcare centres will again be front and centre in early 2019 as commercial property agency Burgess Rawson launches its first investment portfolio auction of the year.

Two Queensland centres will be among the properties auctioned at Crown Casino on Wednesday, February 27, and are expected to be keenly sought by investors.

A Townsville facility with 74 long day care places and leased on a 15+5+5-year arrangement offers an iron clad, entry level investment, according to Burgess Rawson childcare specialists Adam Thomas and Natalie Couper.

Commercial Insights: Subscribe to receive the latest news and updates

The property has a net income of $141,566 plus GST and outgoings.

“It’s very affordable at sub-$2 million. It’s a triple-net lease to Affinity Education, who are a national childcare provider,” Thomas says.

Meanwhile, the longstanding Wandilla Magic Childcare Centre, which has operated at its Loganholme address for more than 20 years, is also on the block, with a renewed 10-year lease and four five-year options making it an attractive proposition.

The property is registered for 118 long day care places and enjoys a strategic location opposite Loganholme P-6 State School.

The Wandilla Magic childcare centre.

Thomas says that while market conditions provided a major test for childcare assets throughout 2019, enrolment numbers show no signs of slowing and continue to underpin demand, with strong sales results in recent months.

“What we’re seeing is a continuance of investors seeking higher caliber, higher quality, long term secure investments,” he says.

Couper says news of childcare heavyweight G8 Education’s sharemarket resurgence this month after its share price fell to a five-year low in October is another telling sign that the asset class is bouncing back.

In November, Morgan Stanley upgraded G8 stock after the childcare provider increased occupancy across its portfolio. G8 shares have since soared as high as $3.14 throughout January, after slipping to $1.91 just three months ago.

“Just in the last two weeks their stock is up more than 13%,” Couper says.

“It just goes to show that childcare is still very much in high demand, both from a parental supply and also an investor perspective.”

“We’re seeing more astute investors being drawn in by more attractive yields at the same time,” Thomas adds.

The two childcare centres will be among a huge portfolio of 50 properties worth as much as $30 million combined to be auctioned at Crown Casino’s River Room at 11am on Wednesday, February 27.