Investors cast wider net as Burgess Rawson auction achieves 96% clearance rate

“It’s been an amazing result,” said company partner Shaun Venables in Melbourne. “There’s been a huge amount of interest in a lot of assets across the country, with investors now casting a much wider net than simply their own backyard.

“It’s consistent with our clearance rates over the past two years of over 90 per cent as there’s been so much demand for passively leased investments with good tenants – regardless of what the market is doing generally. People might be worried about COVID, but they’ve tended to turn to investments they see as being safer.”

Interest at all three auctions was the highest for assets now considered essential services, like fast food, service stations, medical centres and education facilities, and which are regarded as reliable sources of passive income.

One of the most hotly contested auctions was for the much-loved Melbourne landmark, the Sarah Sands Hotel in Brunswick, which had recently undergone a major $2.7 million refurbishment, with the addition of apartments and extended retail. With a price guide of $7 million-plus, the 168-year-old pub, which had originally been a tollgate, attracted more than 100 inquiries.

On the day, a session of spirited bidding pushed the price up to $8.75 million, on a 4.19 per cent yield. Vendor Joseph Chahin of Peregrine Properties was reportedly delighted by the sale.

“It’s such a beautiful, historic hotel that’s had a complete restoration of its facade and key walls, but inside it is a completely new building,” said Mr Venables. “It’s such a popular property and it has a 10-year net lease.

“I think it’s the kind of asset anybody would be proud to own and tell their friends about!”

Another pub, the Bentley Tavern in Bentley, Perth, was at the centre of an 82-bid marathon for its ownership. Tenanted, like the Sarah Sands by the Australian Venue Co, the lot comprises both the hotel and its First Choice Liquor outlet. It ended up selling for $10.06 million, on a 4.06 per cent yield.

The Bentley Tavern was one of four West Australian properties auctioned in Melbourne, alongside childcare centres in Wandi and Southern River, and a government office in Butler. Onlookers believe the owners preferred to have them auctioned in Victoria rather than Perth as a response to intense interstate interest in investing on the west coast.

It was a similar story for a Tasmanian asset that was also auctioned in Melbourne – a branch of The Good Guys in Invermay, Launceston. It was bought for a stellar $11 million, with a 4.68 per cent yield.

Another notable sale of a Melbourne property was the cafe created as part of the TV series The Block in 2015 at the base of the Blocktagon development in South Yarra, originally the Hotel Saville. Now called Kai Dining, it went for $1.1 million, with a yield of 4.68 per cent.

In Sydney, one of the big sales of the day was the KFC in Wellington, which was snapped up for $2.6 million on a yield of just 3.88 per cent. Two other fast-food restaurants, pizza maker Domino’s in Belmore and Mexican outlet Zambrero in Waterloo were both in negotiations for sales after the auction.

“We had strong demand for most of our properties, with six selling even before auction,” said Yosh Mendis, another partner in Burgess Rawson, this time in Sydney. “They were all considered essential services investments, in retail and medical.

“We’ve found people are very hungry for those. They are the asset class that’s the most fiercely contested at the moment.”

Similarly, service stations continued their run as hot properties – despite the move towards EVs and alternative fuels. In the Brisbane auction, two were bought, a Puma station in Bundaberg for $2.57 million on a 5.41 per cent yield, and another in Kedron, a Puma to be rebranded as Caltex, for $4.31 million with a yield of 5.75 per cent.

Interestingly, the first was leased back by the fuel company until 2034, with an option to 2074, and the second to 2035, with an option until 2075. “Service stations aren’t like they were in the old days,” said Mr Venables. “Now they are also convenience outlets and small supermarkets, too.

“They offer good lease covenants and good terms and they’re located in high profile areas. Whether we end up going to EVs or to alternative fuels, the companies are still very confident about their future.”