Fast food outlets a tasty treat for private investors

Larry Schlesinger

A McDonald’s restaurant in Wollongong sold on a yield of just 3.5 per cent and two Guzman Y Gomez eateries in regional NSW changed hands on yields of around 4.5 per cent as private investors favoured securely leased bricks-and-mortar assets at a Sydney portfolio auction on Tuesday.

In total more than $31 million of properties changed hand at the Burgess Rawson event, where childcare centres and medical assets also proved popular.

Of the 11 properties offered for sale, seven sold under the hammer, a clearance rate of 64 per cent.

This McDonald’s in Unanderra sold for $5.75m under the hammer. 

The highlight of the auction was the sale of a freestanding McDonald’s restaurant in Unanderra, a suburb of Wollongong, which was picked up by a Sydney investor for $5.75 million on yield 60 basis points below the cash rate.

The freestanding corner holding on the Princes Highway was offered with 20-year ground lease.

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Also selling under the hammer was a neighbouring Guzman Y Gomez Mexican restaurant offered with a 20-year lease. It sold for $5.73 million on a 4.45 per cent yield.

Both Unanderra fast food outlets were offered to the market by Sydney developer Isaac Property headed by brothers Ben and Jono Isaac.

Another Guzman Y Gomez restaurant in Nowra, on the NSW South Coast, sold for $6.03 million on a yield of 4.55 per cent.

Burgess Rawson partner Yosh Mendis said these three sales results highlighted that “premium properties are still selling really well”.

“We had 750 inquiries on these fast food outlets. They are one of the most sought after asset classes because they offer long-term secure income and are recession proof,” Mr Mendis said.

As with previous auctions of small commercial assets, cashed-up investors have focused on the annuity-style cash flows on offer from blue-chip tenants rather than achieving a return above the cash rate.

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“They see bricks-and-mortar assets as their preferred investment vehicle. The want to buy appreciating assets they can touch and feel,” Mr Mendis said.

“There is nowhere else for them to put their money, except for a blue ribbon investment.”

Alongside fast food outlets, Tuesday’s auction highlighted the ongoing appeal of childcare centres, which offer long  leases in a sector underwritten by government subsidies.

A 53-place childcare centre in Putney in north-west Sydney with a lease in place until 2034 and exempt from land tax (under NSW rules) sold under the hammer for $5.71 million on a yield of 3.5 per cent.

In Maroubra in Sydney’s eastern suburbs, a 66-place childcare centre leased for 10-years to national operator Only About Children sold for $6.35 million on a 5 per cent yield.

Also selling under the hammer was a medical centre in Kincumber on the NSW Central Coast offered with a new 10-year lease. It sold for $1.395 million on a 4.6 per cent yield.

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