Childcare centre stock is in high demand

A Nelson investor has bought a new childcare facility in the Selwyn District for $2.8 million without even visiting it, highlighting the intense demand for this type of property.

The buyer was one of 16 parties to vie for the purpose-built facility, and one of 12 cash unconditional offers with the result representing a yield of 4.9 per cent.

Investment brokers Courtney Doig and Will Franks of Colliers said that investors are hungry to buy modern, well-run childcare facilities such as that at 15 Norris Street in Prebbleton which returns net annual rent of circa $138,000. The 381-sqm centre sits on land area of 1265sqm.

‘‘We fielded interest from investors across the country, including Auckland, Wellington, Nelson, and Queenstown together with plenty of local enquiries, Nelson, Queenstown and Christchurch. This reflects the calibre of this property and the lack of quality investments in the market.

‘‘We’ve got more than a dozen buyers who missed out on this property who are still looking for a quality, low risk investment to add to their commercial portfolio.

Doig said that the property which sold was particularly attractive because it is new, well-located, has a long term 15-year lease to an established operator and has a wellestablished customer base.

‘‘This is exactly what our investors are still looking for.’’

Franks said they were surprised that half the enquiries for the property were from buyers not previously known to them.

‘‘We’ve never had that kind of response before – the outcome is amazing.’’

Other notable sales Colliers have negotiated in this category include a portfolio of six South Island childcare centre that were bought for $20.7 million by a syndicator for a yield of 5.9 per cent. The centres, based in Cromwell, Dunedin, Timaru, and Oamaru, had a combined rent roll of $1.2 million and were previously owned by a North Island investor.

Another syndicator, setting up a childcare centre fund, bought a facility in Pegasus for $2.5 million, representing a six per cent yield, while a Yaldhurst Rd site, also with a long term lease to an established operator, attracted several offers and sold earlier this year for $2.1 million, 6.58 per cent yield, to a local investor.

‘‘It’s certainly a growing investment market with the added attraction that the industry is backed by government funding.’’