Brisbane-based developer Byron Griffith has turned a vacant Bunnings warehouse in Wollongong into real estate gold after selling all five fast food outlets in front of the redeveloped retail centre for $37.75 million to private investors this week.

The F&B portfolio sell-down, which included one of the highest prices ever paid for a single McDonald’s restaurant ($12.85 million) took property total sales at the Bayview Centre to $94.75 million after Griffith Group sold the centre’s main asset – the large format mall – to MLC Asset Management for $57 million in June.

Griffith Group paid Blackstone $35 million in 2020 for the 3.6ha site on the corner of King Street and Northcliffe Drive – about 8km south of the Wollongong CBD – after Bunnings vacated its premises for a new warehouse in Kembla Grange. (The acquisition included a McDonald’s and a Liquorland store).

Griffith Group then spent about $25 million turning the retail warehouse into a homemaker centre whilst also adding drive-thru restaurants on four new pad sites outside. The development was completed in December.

The homemaker centre sold to MLC Asset Management fully leased on yield of 5.75 per cent in June (tenants include Amart Furniture, Supercheap Auto, Autobarn and JB Hi-Fi) whilst the new pad sites were occupied by Hungry Jack’s, Oporto, Starbucks and Domino’s.

On Tuesday, all five retail outlets were offered for purchase as part of a Sydney portfolio auction put together by Burgess Rawson. The Hungry Jack’s sold for $7.6 million on a yield of 4 per cent, the McDonald’s went for $12.85 million on a 4.1 per cent yield, the Starbucks sold for $6.2 million on a yield of 4.65 per cent and the Oporto restaurant for $5.1 million on a yield of 4.8 per cent.

A combined Domino’s and Liquorland asset was passed in, but sold the following day for about $6 million, taking total F&B sales at the Bayview Centre to $37.75 million at an average yield of 4.47 per cent. All five properties were offered with long leases.

In total, $110.6 million worth of retail, childcare and other smaller commercial properties changed hands across two days of portfolio auctions in Sydney on Tuesday and in Melbourne on Wednesday.

Sydney, which had a better quality line-up, generated just over $76 million in total sales and a clearance rate of 83 per cent, while $28.5 million of property changed hands in Melbourne, which achieved a 60 per cent clearance rate.

Burgess Rawson’s Yosh Mendis attributed the strong overall result to a combination of interest rates remaining on hold this week and instability in other investment markets.

“People who have invested in shares and other financial vehicles have turned to commercial real estate with long-term leases, where they know the rent they will earn from day one,’ he said.

As with previous auctions, childcare centres were popular assets alongside big brand retail and petrol stations.

A Guardian childcare centre in Coogee in Sydney’s eastern suburbs sold for $7.21 million under the hammer on a yield of 4.6 per cent on Tuesday.

On Wednesday, a Goodstart Early Learning Centre in Adelaide sold for $2.23 million on low 3.1 per cent yield, while Child’s Play Early Learning Centre in Hobart sold for $4.915 million on a 5.4 per cent yield.

Also selling under the hammer were numerous healthcare and medical facilities, including a Lake Imaging diagnostic centre in Ballarat, which fetched $5.135 million on a 5.5 per cent yield.

Mr Mendis, who marketed the Bayview retail portfolio, said all the buyers were local private investors.

“It was a rare opportunity to buy fast food within larger retail precinct. You don’t get that chance very often,’ Mr Mendis said.

Mr Mendis said fast food assets remained the crown jewels of the commercial property market.

“They’re achieving record low yields as insatiable demand far outstrips supply,’ he said

Appealing aspects of fast food outlets, he said, included long-term landlord friendly leases, guaranteed rental growth, low-risk income profiles and minimal management requirement.

Australian Financial Review – Larry Schlesinger