Record price paid for Melbourne childcare centre
HMC Capital – the new name for HomeCo – has found buyers for 10 Melbourne childcare centres listed last month.
In the biggest deal, the group is banking $20.5 million – a record for a Victorian asset of this type – for a modern complex on 1986 square metres at 117 Kooyong Road, Armadale.
Leased to Explorers Early Learning, which with options can stay until 2067, the result reflects a 4.6 per cent net passing yield.
It also demonstrates an impressive rise on the $18.48m the vendor paid in 2021.
CBRE’s Sandro Peluso, Jimmy Tat and Marcello Caspani-Muto were the agents.
The buyer is an Asia-based investor.
More deals coming
HMC held the Armadale asset, and the nine others forming the portfolio offered for sale, in the HealthCo Health & Wellness REIT, which floated in September, 2021.
All properties are believed to have found buyers, with a Nunawading centre at 86-88 Springvale Rd also fetching a bullish price – c$15m, according to sources.
Proceeds – all up expected to circle $125m – will be tipped into other investments including the recent $1.2 billion acquisition of 11 hospitals from Healthscope.
“This is one of the sharpest yields witnessed for a Victorian childcare centre since 2020 when our CBRE team sold 1 Capra Court, Narre Warren, at a record low 4.25pc,” Mr Peluso said.
“With interest rates having risen 3.85pc since, the Armadale transaction is a testament to the strong and unwavering investment demand toward the early learning sector, in combination with an appreciation for the value of existing centres in a rapidly rising construction cost environment,” he added.
“With an influx of international capital over the past six months, pricing is being driven by strong buyer interest from both domestic and international high net worth private groups along with multiple REITs looking to increase their exposure into social infrastructure real estate,” according to the executive (story continues below).
“The Armadale property and all other assets currently under negotiation are located within established suburbs of Melbourne meaning underlying land values are high.
“When you couple this with rising construction costs at yields between 4.5-5pc and factor in leasing risk allowances, transactions are not occurring a far stretch from replacement cost.
“There is a reason many large-scale investment funds have stopped development in the short term because they are acutely aware of the risk associated.
“The childcare sector in Victoria has experienced significant growth and demand in recent years, driven by changing demographics, increased workforce participation, and a focus on early childhood education.
“The consistent rise in demand, coupled with limited supply, has led to strong investment opportunities within this sector”.
Offshore capital flowing in
Mr Tat said 70pc of childcare centres listed by the agency’s social infrastructure team this calendar year has sold to offshore investors.
“This is not a trend we expect to slow in the short term,” he added.
“Australia’s immigration numbers are also acting as a fundamental driver for investors,” according to the executive.
“The substantial influx forecast is expected to positively influence the property market more significantly than interest rates.
“With increasing immigration rates and forecast interest rates reductions in 2024 there will be a major uplift in demand with limited supply already choking the markets”.
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