Childcare assets attract strong attention from investors

Childcare centres continue to attract the eyes of investors as 60 Arkley Avenue, Claymore, was snapped up for $4.475 million on a 4.8 per cent yield.

With a site area of 1,517sqm, the newly built, 60 place, childcare centre is leased to established childcare operator Kinda Mindi on a 20-year lease, generating an annual net income of $218,400.

The property was marketed by Ray White Commercial Western Sydney agents Jai Sethi, Peter Vines, and Victor Sheu on behalf of a private local syndicate.

“The centre is located within Landcom’s Hillcroft Estate, a long term renewal project that will deliver around 1,490 dwellings providing homes to 4,500 residents over multiple stages,” Mr Sethi said.

“It was an excellent opportunity for an investor to acquire this solid 20 year leased investment, providing stable cash flow with minimal maintenance.”

The property was bought by a private investor who was a first-time investor into the childcare asset class.

Despite the shift in the current market conditions, Mr Sethi said he had noticed that childcare assets showed no signs of slowing down.

“This is due to childcare being an ongoing government subsidised industry providing an essential service,” he said.

“Childcare also provides robust, long-term, commercial leases offering stable cash flow to investors.

“There is also a highly competitive market of professional childcare operators, regularly seeking expansion opportunities.”

Ray White head of research Vanessa Rader said the budget announcement last week committed greater investment into the childcare and aged-care sectors which would increase the attractiveness of those assets to invest in.

“The anticipated uplift in demand for childcare bodes well for existing establishments and their owners together with those extending or developing new centres,” Ms Rader said.

“Many experienced operators are seeking out new opportunities to grow their operations into new suburbs and markets, despite high development costs, the uplift associated with increased returns being increasingly attractive.

“Despite the growth in interest rates, we continue to see demand for childcare assets at low yields, their long term returns with fixed increases attractive to a range of buyers who can see the future earning potential of these assets and their long term land value.

“Those buyers who have invested into childcare assets are well placed to benefit from this increase in demand for places and likely uplift in income which comes from improvements in subsidies.

“Similarly, growing demand to lease these assets are expected to emerge, setting new benchmarks for rents, improving the returns for childcare investors.”