South Australia’s largest childcare centre sale since 2022

21 May 2024

A Victoria-based investor has purchased a South Australian childcare centre for $8 million, marking the largest childcare transaction in the state since 2022.

Located at 2-8 Botany Drive, Golden Grove, the 900sqm childcare centre is fully leased to ASX-listed, Nido Early Learning on a 20-year initial lease. 

CBRE’s Australian Healthcare and Social Infrastructure team of Sandro Peluso, Jimmy Tat, Marcello Caspani-Muto and Rhyce Scott managed the sale which achieved a yield of 5.75%. 

This transaction is the team’s sixth in as many weeks across Victoria, South Australia and Western Australia. 

“These transactions are occurring on a national platform to start the year. The team have now sold seven centres since January, and they are not location specific. These are across Victoria, Queensland, South Australia and Western Australia. Childcare investments are becoming more appealing in investors’ eyes, despite broader headwinds in the economy. However, just like much of the market it’s still no walk in the park,” Mr. Peluso said. 

“Detailed analysis and time need to be spent with private buyers to educate them on lease security, tenant performance and return fundamentals in the space as for many they could be first- or second-time investors. It’s these buyers that continue to perform with the team having no sold more than three times the volume of our nearest competitor nationally in 2024.”

Mr. Caspani-Muto added, “The majority of our transactions occur via private capital or syndicates. These buyers continue to take a medium to long-term view of their passive investments and are willing to overlook the short-term cost of borrowing, if they are borrowing funds at all, to secure their investment future for the next 15 plus years.”

“A more proactive approach to buyer education has also been critical in achieving these outcomes. Cash flow analysis, cost of capital comparisons and factoring in the benefits of depreciation alongside fixed rental growth has all been critical to demonstrate the positive cash flow nature of these assets, even if they are purchased below the cost of debt at a surface level.”