Investor Girish Ramkrishnani says it makes more sense to buy high-yielding commercial properties in regional South Australia, than hold residential investments in Melbourne, after he snapped up office and industrial assets at a portfolio auction on Wednesday.

Mr Ramkrishnani, 40, acquired an office building and storage shed in Kadina on the Yorke Peninsula for $1.63 million on a 6.8 per cent yield and a support services facility in Port Augusta for $620,000 on a yield of 6.4 per cent. Both are exempt from stamp duty.

The Kadina facility is leased to National Disability Insurance Scheme support provider Novita until 2028 with two further renewal options while the Aboriginal Drug & Alcohol Council leases the Port Augusta building until 2025 but with renewal options until 2031. Both tenancy agreements include built-in annual rent increases.

Both properties were offered as part of a Burgess Rawson portfolio auction held in Melbourne on Wednesday. Seven out of 14 properties sold under the hammer for a total of $17.6 million after a similar auction in Sydney on Tuesday generated total sales of $40.3 million.

Mr Ramkrishnani told The Australian Financial Review he owned five to six residential properties in Tasmania and Victoria, but was now turning his attention to opportunities in commercial real estate.

“Investing in residential in Victoria is getting harder and hard. Land tax is ridiculous and there are a lot of costs associated with managing these properties, which are generating returns of around 3 per cent,’ he said.

“Over a period of time I will sell residential and move into stronger returning commercial real estate. It does not make sense to hold residential. Capital growth is the only attractive thing, but these residential investments are not growing as I want,’

Having bought both SA commercial properties at attractive yields, Mr Ramkrishnani said he was confident of lifting those returns over time as rents increased annually. Further down the track he expects to make a healthy gain when he eventually sells these assets.

“I expect interest rates will go down which will make the returns on these properties even more attractive,’ he said.

Mr Ramkrishnani’s enthusiasm for regional SA was matched by another investor who paid $1.16 million on a 6.3 per cent yield for a cold storage industrial facility in Whyalla leased to Woolworths-owned PFD Foods. There were 38 bids for the property.

Highlighting the strong demand for industrial and healthcare assets, the standout sale of the day was a Ballarat distribution centre offered with a new seven-year lease to St. John of God Health Care, one of Australia’s largest, Catholic, not-for-profit health care organisations.

The 15000 sq m facility with a two-level office, warehousing, hardstand and 30 car spaces on a 4,144 sq m industrial-zoned site attracted 66 bids before selling to a Melbourne family for $3.93 million on a 5.5 per cent net yield.

Also selling under the hammer of veteran auctioneer David Scholes – and generating the highest sale price of the day – was the St Kilda Day Hospital & St Kilda South Medical Centre in the inner Melbourne suburb of Elwood.

Offered with leases in place until 2028, the hospital sold for $5.701 million on a yield of 7.7 per cent, after long-term owner Dr. Vasily Lebedev put in a vendor bid of $5.7 million.

“Medical is the next industrial,’ Burgess Rawson managing director Ingrid Filmer told the Financial Review.

“Everybody wants to own medical assets. It’s the emerging category and theme we will see play out over the first half of the year,’ she said.

Also selling under the hammer was a newly fitted out ANZ bank branch in Melbourne’s affluent bayside suburb of Hampton East. It sold for $3.251 million on a 5.1 per cent yield.

However, the vendor walked away with a $300,000 or 8.4 per cent capital loss having put it up for sale just two months after settling a $3.55 million purchase.

Another ANZ bank branch in the Victorian regional hub of Shepparton sold 15 minutes after being passed in on a vendor’s bid of $3.3 million, It had been purchased for $3.47 million in August 2021 when interest rates were near zero. The purchase price was not disclosed.

A new Hungry Jack’s restaurant in the outer northern Perth suburb of Yanchep was passed in despite being offered with a 10-year lease after bidding reached $4.2 million equating to a 5 per cent return.

Ms Filmer said the results across the two days of auctions boded well for the remainder of the year. “I think it’s been a strong and positive start,’ she said.

Australian Financial Review – Larry Schlesinger