Enormous childcare centre fetches record price

The Brighton asset is licensed for 171 children.

A near new childcare centre investment in one of Melbourne’s most exclusive suburbs has sold for $17.5 million – a record for an asset of this type in the Bayside municipality, and the second highest price paid for one in the state.

The Brighton centre contains 2380 square metres and 37 basement car parks.

The result for 46 Dendy Street, Brighton – with 171 places, one of the state’s largest centres, tenanted to G8 Education, trading as The Learning Sanctuary – reflects a 5.19 per cent net yield.

Its value seconds only an Armadale facility which traded last May for $20.5m.

The ex-Marine Hotel, recently a surprise development site, is for sale.

That centre, leased to Explorers Early Learning, is licensed for 168 places.

CBRE’s Sandro Peluso, Jimmy Tat and Marcello Caspani-Muto were the agents both times.

The latest deal comes a fortnight since the ex-Marine Hotel, on 1.2 acres at the intersection of New, Park and Well streets, in the suburb, was listed as a surprise mixed use development site with c$18m-plus hopes.

Private capital dominant investment type

One of the state’s largest childcare centres, based on places, 46 Dendy St returns annual net rent of $910,047.

“We had noticeable interest from both private and institutional level investors,” Mr Tat said.

“The reality is private capital is leading the way by notable margins in most of our transactions between $15-$50m,” he added.

“This is across both domestic and international capital,” according to the executive.

“There was notable international interest…with most capital coming from Singapore or Taiwan (story continues below).

G8 Education leases 46 Dendy Street, Brighton.

“Both underbidders were international groups however in this instance the eventual buyer was a local investor”.

Another major deal

The Brighton deal comes two years since an Artamon, Sydney, facility licensed for 149 places traded for $22.8m – a five pc return. Also in late 2021, in that city’s St Ives, a complex for 98 children collected $15.9m – a four pc yield.

In Melbourne, a Brunswick West centre licensed with 134 places traded for $13.16m – a 4.1pc – also about that time.

A Malvern East asset meanwhile – 11 Chadstone Rd – permitted for 158 clients, sold for $16.9m in August, 2017 – a market peak – reflecting a 3.97pc yield.

CBRE brokered that deal and, it says, 78pc of the country’s recent childcare centre transactions over $10m.

“When selling both childcare and healthcare investments at these price points the focus for both our team and broader investment market is moving away from the returns and is more focused on replacement cost,” Mr Peluso said.

“This is no revelation however astute investors are well aware the buyside opportunity being witnessed will end in short order and may not be seen again for a long period,” he added.

“Yields will again sharpen as supply reduces which will be further catalysed by the eventual shift in the rate environment,” according to the executive.

“The simple fact is the cost of buying and developing a new centre all inclusive if often resulting in the same or an inferior yield to what can be achieved buying a passing and land rich investment like the subject property today”.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.