How 7-11, Freedom Fuels and Coles could make you richer
The coronavirus pandemic has sparked a fresh surge in interest in properties where big name brands like 7-11, Freedom and Coles pay the mortgage for you.
Properties hosting everyday services that have proved relatively immune to pandemic lockdowns such as service stations tenanted by big brand names are among the hottest tickets in town for high net worth individuals, with agents reporting high levels of demand from Brisbane to Townsville and just about everywhere they come on the market.
Commercial agent Tom Moreland of Cushman & Wakefield Brisbane said defensive industries – that is those considered immune to recessions and economic downturns – were also proving relatively safe during the coronavirus pandemic, with most deemed essential services during lockdowns.
“The full convenience segment is a very sought after market by high net worth investors,” he toldThe Courier-Mail. “More often than not it’s private investors.”
“Given where interest rates are sitting, these are very attractive with long term leases in place. Defensive industries performed well, service stations for the most part remained open during the pandemic which is ongoing, so there’s a lot of attention to that asset class in particular.”
Among those looking were “lots of private investors through self managed super funds or private investment companies”, Mr Moreland said. “It’s a very active part of the market.”
“Part of the attraction is they’re very well known brands and investors gain a level of comfort from them being very high level operators with successful businesses”.
One of the jewels on the market right now is a five-year-old 7-11 site at 2009 Sandgate Road, Virginia, in Brisbane’s northside – which is part of a wider retail precinct that includes the likes of Bunnings, Officeworks, McDonald’s, Hungry Jack’s, BCF, Supercheap Auto, Chemist Warehouse and Amart.
The 2,843sq m site was leased to 7-11 for 15 years to 2031 (so 10 years remaining), with options to 2051, net annual income at $390,778 plus GST and annual increases fixed at 3.75 per cent – and it’s “the only inbound service station for 7.5 km”.
The leasing deal with 7-11 means the country’s third largest service station operator would pay all the outgoings except land tax, and the prime location sees 44,380 vehicles passing daily, according to Mr Moreland who has the site co-listed with colleague Michael Collins.
An even higher net income level is off another service station site that’s on the market at
1266 Anzac Road, Kallangur, 25km north of the Brisbane CBD, which brings in $476,415 annually plus GST with annual increases fixed at 3 per cent.
Freedom Fuels holds a 15-year lease to 2034 with options to 2049 and brings in 77 per cent of the income on the 2,952sq m site. Expressions of interest for the Kallangur service station site close at noon on Friday April 30, which is also the deadline for another like it – tenanted by Shell Coles Express at 190-196 Nathan Street, Aitkenvale, in Townsville.
The estimated income for the Townsville site is $377,643 a year plus GST with a five year lease renewed and option out to 2032, with minimum 3 per cent annual rent increases.
The site has been tenanted for over 30 years according to Mr Moreland, and is just 300m from the Stockland Townsville Shopping Centre anchored by Woolworths and Coles/Kmart in Aitkenvale.
The net income of all three service stations were higher than the Queensland average, which M3Property’s Queensland Service Station White Paper (released September 2020) put at $370,754.
The white paper, co-authored by M3Property managing director Ross Perkins – a valuer by trade – expected service stations “to benefit from increased domestic travel when all State/Territory borders re-open, particularly while international borders remain closed”.
“It is also possible that we will see more activity from investors who have not traditionally been active in the service station market due to the more subdued performance of some other property sectors at current.”
It also said service stations with cafe, food, and dining services in the same precinct saw net rents rise.
“The COVID-19 pandemic has increased the popularity of drive-through fast food, which increases turn-in traffic for multi-tenanted assets.”
The properties are part of a 10-strong commercial list of properties set to either be auctioned on April 29 or see expressions of interest close April 30, with a mix of fuel and convenience retail sites located in Sydney to Brisbane and as far north as Townsville.
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