'That's a gamble we're prepared to take': Childcare centre willing to accept just $1 for the sale of its Merrylands branch
At a time when the childcare industry is undergoing an unprecedented boom, one DA-approved childcare centre site in western Sydney is being offered for sale at what its owners are billing as potentially as little as one dollar.
It’s being auctioned off with no reserve price in exactly the same area as another DA-approved site that recently fetched $2.52 million.
“We’re auctioning it off for whatever we get for it and donating that money to charity,” said Carl Elassal, the founder of Thrive Early Learning Centres, which currently operates 12 centres in NSW and is now looking to expand into Victoria and Queensland. “That could conceivably be $1 if not many people turn up to bid.
“That’s a gamble we’re prepared to take. And usually the developer would ask for a contribution from the operator of about $1 million towards construction costs, but in this instance, he’s agreed to forego that. We’re doing this both for charity and to allow a new childcare operator to enter the market without some of the usual difficulties.”
That childcare centre site, with approval to operate as a 91-place business, is in Merrylands and will be made available for a 15-year lease at market value rent. The developer, diversified property development and investment firm Clutch Capital, will also fund a $1 million to $1.5 million dollar fit-out.
The new operator will need to invest only about $100,000 into the centre in furniture and play equipment such as bikes, painting easels and art supplies.
The auction will take place on October 29 at the launch of a new not-for-profit childcare collective, the National Coptic Childcare Alliance (NCCA), which chief executive Elassal says is working together with the existing Australian Childcare Alliance (ACA) to provide a stronger voice for the industry.
The site, at 8 Smythe Street, is only two kilometres from a similar site, at 131 Excelsior Street, that just sold to rival operator Live & Learn Academy, which now owns four sites in NSW in addition to the four centres it leases.
“The sector is just very strong at the moment,” said Live & Learn director Matthew Eskander. “It operated throughout COVID and obviously the federal government is helping fund it through its childcare subsidy.
“It’s critically important as the provision of good childcare enables people to return to work, which boosts the economy and, in turn, helps the country. The government is very likely to keep supporting the industry as, in some ways, we’re the backbone of the country, allowing families and professionals to continue making their contribution.”
At independent global property consultancy Knight Frank, director and joint head of south Sydney Anthony Pirrottina said the demand for DA-approved childcare development sites was bucking the trend of the cooling commercial property market.
Recent sales of DA-approved sites across metropolitan Sydney had netted nearly $9 million and achieved close to record high sales rates for their markets. They have included, apart from the one in Merrylands, a site in Peakhurst for $1.95 million, another in Toongabbie for $1.9 million and a fourth in Guildford for $1.51 million.
“A lot of the operators like to be in areas like western Sydney, where both parents might work to earn enough to pay the mortgage and bills and childcare,” said Pirrottina. “More affluent areas aren’t so attractive as one parent might stay home with a child, and less affluent suburbs might have a demographic that couldn’t afford childcare.
“The sector is getting stronger and stronger. The government has increased subsidies, which is helping make it very stable, there’s a push from employers for people to return to work and there are usually long leases in play of 10 to 20 years, so the short-term movements of the market don’t matter so much.”
When the property market was at its peak, DA-approved childcare development sites in western Sydney were trading at about $40,000 per place, but that figure has held firm, post-pandemic, or even risen.
That price movement is in stark contrast to the residential market and, where a house might once have been built on a vacant block, depending on zoning, now a childcare centre is a much more attractive proposition, Pirrottina said.
In addition, rents for the centres have increased by as much as 20 per cent in some parts of Sydney. “The rent on a typical centre 15 to 20 kilometres from the middle of Sydney would previously be around $4000 per place per annum, but that’s now around $5000,” Pirrottina said.
“With so much activity in the sector, it’s conceivable there could be an oversupply at some stage, but certainly not yet.”
The DA-approved childcare centre site at Smythe Street, Merrylands, will be auctioned at an NCCA function on October 29 at The Star Sydney in Pyrmont.
