Artarmon childcare centre sets national record with $21 million sale
A 210-place childcare centre in Sydney’s Artarmon has sold for $21 million – crushing the national price record for a single-tenanted childcare asset by more than $4 million.
Trading as Little Zak’s Academy Artarmon, 6 Clarendon Street beat the previous $16.9 million record set in August 2017 by the Nino Early Learning Adventures centre in Malvern East, Melbourne, which sold on a 4.2 per cent yield.
The sale of the 1208-square-metre site, with a 6 per cent return, also set the highest land rate of $17,384 a square metre in the lower north shore suburb.
The childcare asset was purchased on a 6 per cent yield. Photo: Supplied
Although CBRE’s Aaron Arias, who closed the deal with Toby Silk and Nicholas Heaton, could not disclose the buyer’s identity, he confirmed that it was an Australian investment fund that purchased the asset.
More than 180 groups made inquiries on the listing, mostly drawn to the security of the investment and strong future prospects, Mr Silk said.
The three-storey property with 47 parking spaces is on a new triple net 10-year lease to childcare provider Affinity Education Group with options until 2052. With fixed annual 3.5 per cent rental increases, it earns a net income of $1.26 million a year.
An Australian investment fund has bought the centre. Photo: Supplied
“At the tail end of 2017, childcare investments took somewhat of a blow in the market – largely due to oversupply and availability of education and child care permitted sites,” Mr Silk said.
“However, in suburban areas such as the north shore, that are popular with young families and typically have higher median household incomes, the requirement for private childcare centres remains strong and this is boosting investment in the sector.”
The recent announcement of changes to the childcare benefit scheme by the Turnbull government, which start in July, has built up interest in the sector, Mr Arias added.
“The threshold lift is encouraging consumer uptake of childcare services, and as a result we’ve noticed confidence being restored in the sector as a robust investment choice.”
Childcare assets have been hot property for ASX-listed trusts in recent months. Folkstone Education Trust, the country’s biggest childcare centre owner, snapped up a portfolio of nine Brisbane childcare centres for $63.2 million in early April.
And a 3204-square-metre childcare centre in Melbourne’s Newport sold off-the-plan for $8.1 million to private investors in mid March.
Despite more stock being added to the market, yields have been compressing at an “unparalleled” level, a Burgess Rawson 2017 report on childcare properties wrote.
Average yields have tightened to 5.84 per cent in 2017 from a peak of 8.5 per cent in 2012, the agency’s data shows.
The sale of a G8 childcare centre property in Sydney’s Vaucluse in May 2017 for $4,425,000 pushed yields to a record low of 3.57 per cent.
The report attributed the squeeze on yields to investors’ growing awareness of the sector, low interest rates, demand for returns in a low-risk environment and strong land values.
