ASX listed HomeCo’s Daily Needs REIT has purchased a premium childcare offering tenanted by the country’s largest private early learning operator, Guardian Early Learning.
With a net income of $457,275, 138 Hoffmans Road transacted at a yield of 5.3% – making it one of the sharpest results achieved in 2020.
The second acquisition by the group in recent weeks, the 804sqm Essendon facility first commenced operation in 2010 and features a recently renewed 10-year lease (plus options) with Guardian Early Learning, owned by Swiss private equity firm Partners Group.
The sales campaign was handled by CBRE’s Healthcare & Social Infrastructure team of Sandro Peluso, Josh Twelftree, Jimmy Tat and Marcello Caspani-Muto.
The third early learning offering by the team in excess of $8,000,000 in 2020, the transaction follows the largest of the year: 282-288 Geelong Road, West Footscray, which was also handled by CBRE.
Most recently, the team facilitated the sale of a new childcare centre at 80 Homebush Drive, Tarneit, to HomeCo on 20 November – the property was acquired for $6,570, 000.
Mr Twelftree said; “These sales highlight the emergence of property funds and syndicates as the most aggressive buyers in the $6m+ childcare price range.”
“Traditionally these funds would rarely pay 6% for assets; however, it’s becoming the new norm for these groups to pay sub 6% – while it used to be the private investors that would out muscle property funds and syndicates, the tables have now turned,” Mr Twelftree continued.
“Investors within a fund are now content to receive a 5-5.5% return on a childcare investment, given the security this asset class offers.”
Mr Peluso added; “Now, more than ever, the importance of the childcare sector within the Australian economy is evident, with the sector contributing 0.7% to national CPI in September – by far the greatest contributor to the economy in this period. This figure is expected to jump even higher once October figures are revealed.”
“The Australian Government’s continued investment in this space, even during a time of economic crisis, is a clear indicator of its ongoing commitment to supporting childcare,” Mr Peluso continued.
“It highlights how important the childcare sector is to the Australian economy, with a number of studies even pushing for a further increase in sector support to help restart the economy.”
The CBRE Australian Healthcare & Social Infrastructure Team in 2020 have secured an 80% market share across Australia in the sale of premium childcare investments over $7,000,000
Our Views
Our view is that HomeCo are on the right track with the Daily Needs REIT and HealthCo strategy.
We are also of the view that Child Care assets in the right locations are an attractive asset class given the long leases and stable income. We also expect REITS will continue to seek to aggregate child care assets and portfolios and will pay a premium for portfolios.
We are currently employing investment strategies with investors and developers to acquire / develop assets in this sector.
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