Modern South Melbourne childcare centre trades for $10.25 million

Another premium-quality Melbourne childcare centre has sold for an eight-figure sum.

In South Melbourne, 97 Tope Street is the only childcare centre to have exchanged within a 1.5 kilometre radius of the CBD since 2014.

Local developer Melinda Cohen achieved a price of $10.25 million for the asset, reflecting a rate of $85,415 per place.

A play area on the ground floor of the centre.

Given the annual rent tenant Guardian Early Learning pays ($434,700), the deal is being struck on a low passing yield of 4.2 per cent.

The multi-level centre has an internal area of 1827 square metres.

CBRE’s Sandro Peluso, Josh Twelftree and Jimmy Tat pointed out in their marketing that the fit-out cost a “staggering” $6.3 million.

It sits on a 736 square metre block zoned Commercial 2.

However, this gazetting is due for review in 2028.

Mr Peluso said 97 Tope Street was “one of the most exciting childcare offerings to hit the market in recent years.

The centre’s fit-out cost was $6.3 million.

“The site’s corner landholding and city fringe location, only 850 metres from Crown Casino and 1.5 kilometres from the CBD, offer solid long-term investment and future development prospects,” he said. “Its blue-chip location and flexible lease inclusions made this opportunity suitable for a range of investor profiles”.

“The property is currently zoned Commercial 2 and a scheduled review of its zoning will be taking place in 2028”.

A Commercial 1 rezoning would make 97 Tope Street a high-density residential development site.

Mr Twelftree added “Guardian is one of the country’s most sought after childcare covenants and a substantial amount of capital has been spent on the property’s fit-out”.

“As volumes of new childcare supply decrease, demand for premium offerings remain strong due to landlords’ confidence in tenant ability to achieve and maintain high levels of occupancy into the future”.

Mr Peluso said some of the Australia’s listed childcare providers have continued to see strong share price growth.

Last week, the Charter Hall Education Trust spent $75.5 million 13 childcare assets on Australia’s east coast. Only a few days earlier, we reported that an offshore investor paid $5 million for a modern centre in Pakenham which was for sale off-market.

Last year, we reported that two other premium-quality Melbourne childcare centres in Elsternwick and Bentleigh – sold for eight figure sums.

However several smaller investment-grade centres have sold including in Doreen, Epping, Greensborough, Mickleham and Ormond (refer to below table, for other examples).

Source: CBRE

In 2017, Little Lane Learning Centre paid $60 million for a 9536 sqm site in Buckhurst Street, South Melbourne. The site was expected to sell to a major developer given it was offered permit-ready for four residential skyscrapers containing 1004 dwellings.

“The sector’s improved outlook has also been driven by a reduction in supply, due to tighter planning and borrowing criteria; increased government funding; and population growth in the 0-4 years age bracket” Mr Peluso said.

This pocket of South Melbourne has made headlines in recent months for attracting some high-profile investors.

Last July, the Department of Treasury and Finance paid $23 million for 142 Dorcas Street, which it will rebuild as a police station. In October, the Fox family paid $5.2 million for a low-rise office next door to another it bought for $4.4 million in 2015.

An image used in CBRE’s marketing showing 97 Tope Street, South Melbourne, and the CBD, about 1.5 kilometres away.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco
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