March 2022 Newsletter
Our thoughts are with you
We hope you and your loved ones managed to stay high and dry during the recent flooding. Sadly we are aware that so many families and centres in South-East Queensland and Northern New South Wales have suffered considerable losses with the floods and our hearts go out to them. Amongst all the loss and anguish it is truly wonderful to see communities coming together to support each other.
The team at Childcare Concepts are supporting their own communities and their centres’ communities and we want you to know that we are also here for you.
Although we may not physically be able to assist you please don’t hesitate to reach out to our team members if you need referrals to any trades, suppliers or specialists. We have close working relationships with a wide network of childcare specialists and if we can support you in any way, even if just a simple introduction to help ease your load in some small way, we’re here for you.
As we have seen particularly over the last two years no matter what is happening externally, the childcare sector continues to provide an essential service to the economy. Given this we are experiencing so much interest in the sector from experienced approved providers both large and small, independent and corporate, real estate investment companies, investors and more that all our listings are presently sold, under offer or are about to be … so we need more listings.
As you’ll see from the below articles now is a great time to sell with record yields on assets and high returns on businesses so call us to discuss your options in confidence with us.
Best wishes to everyone,
The Childcare Concepts team
Strong results continue to drive demand for childcare centre
- Record childcare property sales volumes continue
- REITs investing in childcare portfolios
- Strong valuations are keeping yields below 5 per cent.
Company results are continuing to highlight the strength of childcare property as an asset class.
Record sales transactions and strong demand are delivering growing valuations for well-located childcare operations in Australia.
While this is keeping yields to below 5 per cent, many point to the stable and consistent earnings generated from childcare assets.
Childcare Concepts Founder Phillip Malek said the results from major investment groups indicated the growing demand for childcare property.
“Throughout the pandemic, childcare has remained a trusted and essential part of our economy,” he said.
“Investors are realising how the sector really is a foundation of our economy, and buying and developing assets to support it.”
REITS expanding their childcare holdings
This month HealthCo Heathcare and Wellness REIT confirmed the expected earnings for its $550 million-plus portfolio, which includes about 20 per cent childcare assets.
Since launching in September 2021, the real estate investment trust has targeted childcare property including the $108m Metro Childcare Portfolio of 13 newly built centres.
This followed the half-year results from Charter Hall’s Social Infrastructure REIT, highlighting its growing investment in childcare. It put the increase in valuations across its childcare portfolio at 13.2 per cent.
The trust had acquired a portfolio of 18 childcare centres in Western Australia leased to GoodStart and G8 in December 2021 for $100 million, as well as five other childcare centres in Greater Melbourne, Brisbane and on the Sunshine Coast operated by Nino Early Learning and Only About Children.
Further, it developed four centres valued at $28.3 million on a yield on cost of 5.6 per cent, and sold two centres for $8.8m at a 37 per cent premium to book value.
Internal data cited in the Charter Hall results indicated the total sales of childcare centre sales from July to December 2021 was $619m, transacted at an average yield of 4.6 per cent. This sales volume was more than the combined sales throughout the 2021 financial year.
“Continued yield compression reflects ongoing strong demand for long WALE assets in ‘essential’ sectors with stable income across Australia,” it reported.
Is childcare property a good investment?
The use of formal childcare is expected to rise given the long-term trend for dual-income families.
As people return to work in person at the office and the threat of Covid-19 moves beyond the peak, families are once again turning to childcare to support their work and life.
“Families are choosing high-quality childcare in locations that are convenient to them to balance the demands of work and raising their kids,” he said.
“These societal trends are here to stay. Childcare has been acknowledged as one of Australia’s essential industries. That’s why childcare properties are such a good investment and highly sought after.”
The Australian Government has committed to retaining its $40 billion Childcare Subsidy program to 2024/2025, underpinning the sector. Heading into another election cycle, childcare continues to have bipartisan support.
Childcare property news Australia
Around Australia there have been significant transactions in childcare property.
Perth-based Jarra Property sold a portfolio of YMCA WA and Nido-operated centres to Dorado Property for $18.49m.
Investment giant Australian Unity also acquired three childcare centres in regional Queensland’s Toowoomba and Pittsworth late last year for about $15m through its Australian Unity Childcare Property Fund.
It follows a $25m capital raising late last year from South Australian fund manager Accord to create a $300m-plus childcare fund. It bought a group of five centres but flagged plans for a portfolio of up to 80 within five years.
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Childcare centre sales and leases. Demand is ‘running hot’.