Frenzied auction, low retail yields – can they be repeated with individual sales?

Seven 7-Eleven convenience stores and service stations in NSW were bought at a Sydney auction in August by private investors for a combined total of $33.085 million, with a benchmark yield of 3.85 per cent and average yield of 4.6 per cent (The Urban Developer).

The properties sold by the BRW Rich List Withers & Barlow family, were purchased with leases of 15 years, plus three five year options (The Urban Developer).

The Withers & Barlow family have an additional 3 stores that will be auctioned in QLD and another six in Victoria, bringing the total properties being sold across Australia to 17. The property locations and prices in NSW as reported in The Australian:

  • Ashfield sold for $4.9m with a yield of 4.21%
  • Camperdown  sold for $3.65m with a yield of 4.72%
  • 940 Pittwater Road, Dee Why sold for $5.05m with a yield of 3.85%
  • 38 Barrenjoey Road, Mona Vale sold for $4.32m with a yield of 5.04%
  • Lane Cove Road, Macquarie Park sold for $6.01m with a yield of 4.94%
  • Sans Souci sold for $4.55m with a yield of 4.96%
  • St Ives sold for $4.6m with a yield of 4.96%

The sizes of the properties vary from 1113 square metres to 5598 square metres with an expected rental income between $166,566 and $334,647 per year (BRW).

7-Eleven Stores Pty Ltd rank in the Top 30 of BRW’s Top 500 Private Companies Listing.

The recent RBA decision to the keep the cash rate unchanged at 2.5 per cent was seen as an additional incentive for the property buyers (SMH).

The yields shown represent what appears to be very strong yields for the sale and lease back interest. The extent to which these yields will be repeated in the market for one off sales remains to be seen. Often demand for small investment properties is heightened when groups of like properties are auctioned at the one time driving yields down to levels that properties wouldn’t otherwise achieve if they were to be offered individually.

Historically, valuing auctioned sale on leaseback properties after the frenzied auction yield has proven to be difficult when they are considered on a one sale basis. It remains to be seen if the yields for individual properties could be ratified by individual sales.