Strong returns fuel investor interest as service station sales take off

First brand new service centre valued over $10 million being brought to market in NSW.

Service centres continue to remain highly coveted by investors, with McDonald’s acting as the benchmark and most highly sought-after covenant, according to Colliers International.  

With just one completed service centre greater than $10 million offered to market in 2016, food retailers, particularly McDonald’s are considered the ‘holy grail’ when it comes to driving value, especially when coupled with multinational fuel operators such as BP and Caltex with the diversification across both sectors.

“Service centres have traditionally been tightly held by investors, with secure covenants to some of the world’s largest brands, combined with long lease terms and strong underlying land value in high-profile locations making these properties extremely sought after,” said James Wilson, NSW Director of Retail Investment Services at Colliers International. 

“The lack of service centre sales along Australia’s east coast during the previous two years reinforces how tightly held these assets are, with a growing demand from investors targeting this asset class resulting in a continued tightening of yields during this period.”

Nowra Service Centre which is being sold by James Wilson, Alex James-Elliott and Harry Bui represents the first brand new NSW service centre offered in 2017 worth over $10 million.

The brand-new Nowra Service Centre will comprise of premium lease covenants from blue-chip listed national tenants McDonald’s and BP, as well as ASX listed national retailer Autobarn. 

“We anticipate strong investor interest in Nowra due to the security and income growth potential afforded by the 3% fixed rental review mechanisms featured by multinationals including a rare 20-year net lease to McDonald’s and a 15-year net lease to BP,” said Alex James-Elliott, Executive, Retail Investment Services of Colliers International 

“The BP and Woolworths’ partnership announced earlier this year lends further strength to the covenant offered across Nowra Service Centre, especially when coupled with a rare McDonald’s head office lease.”

Nowra Service centre represents a joint venture between developers Isaac Property and RG Property.

Colliers International are also currently selling a portfolio of 17 petrol stations across Australia’s East Coast, as well as a service centre in Hoxton Park that is occupied by a Hungry Jack’s, a Shell Service station with Coles convenience store and a Coles Express coin operated car wash.

Colliers has recorded approximately $2.206 billion worth of premium investment properties, consisting of fast food and service stations, since January 2016. Service stations were the most highly transacted Premium Investments sector in the first half of 2017, with more than 47 service station sold, totaling $240 million.

“Oil is liquid gold for savvy investors snapping up regional service stations across Australia, demand for the asset class is high, with retailers being able to generate cash from the sale of petrol pumps as well as the more lucrative retail component,” said Harry Bui, National Director of Investment Services at Colliers International. 

Colliers International is offering Nowra Service Centre for sale via Expression of Interest, closing Thursday, 16 November 2017, at 2pm (AEDT).

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