CRE Industry-first as online portfolio auction bidding delivers record breaking KFC yield

Michael Collins • 24/03/2020

Cushman & Wakefield has pioneered online auction bidding for commercial real estate in a first for the commercial property industry, successfully selling both retail food properties in Dulwich Hill and Rhodes in Sydney that went under the hammer.

The sales highlighted that high net worth investors with significant amounts of cash have continued to target commercial property assets that provide strong yields and the security provided by blue chip tenants on long term leases.

The two properties sold at auction were bid on by 11 private investors that accessed the online bidding platform as well as phone bidding and in-person at the live Auction room at Cooley Auctions and remote rooms in Melbourne and Brisbane.

Those who attended the live auction were subject to stringent social distancing measures in line with government and World Health Organisation guidelines in place at the time. This included screening bidders before entry, having chairs 1.5m apart, providing hand sanitiser, encouraging personal hygiene and having separate rooms available to elderly bidders who may not feel comfortable in the main room.

The properties included a site in Dulwich Hill occupied by KFC since the early 1970s on a renewed 10-year lease. The property was sold for $4.26 million on a 3.17% yield, the lowest yield ever recorded in Australia for a fast-food retail asset. Yosh Mendis and Michael Collins of Cushman & Wakefield managed the sale which resulted in over 340 enquiries and 53 contract requests.

The second site is home to coffee roaster and retailer, Chambers Coffee in Rhodes and was sold for $2.99 million, representing a 6.02% yield in a sale managed by Cushman & Wakefield’s Yosh Mendis and Geoff Sinclair.

Cushman & Wakefield’s National Head of Investment Sales, Michael Collins, said: “Our national investment sales portfolio auction platform is one of Australia’s leading avenues for the sale of blue-chip investment assets across Australia and Thursday’s results were a true reflection of this, even during unprecedented times of uncertainty.”

“The fact that the Dulwich Hill KFC property was sold on a record-breaking 3.17% yield amid unprecedented market volatility demonstrates that demand for commercial investment properties with strong and secure long-term leases isn’t abating.”

“The pioneering of an online auction bidding confirmed that investors have been quick to embrace new technologies and adapt to therealities of the rapidly changing external environment. During the seamless digital process, verified bidders accessed the auction via their mobile phone, iPad or PC from their home. We expect this will become the new norm for commercial property auctions over the coming period,” Michael Collins added.

Yosh Mendis, said: “We had under bidders from KFC Dulwich Hill who then hotly contested for Chambers Coffee in Rhodes, some who had never inspected the property but arrived on auction day with the single objective of purchasing a long term leased passive investment asset.”

“Many private investors also continue to take a long-term view when it comes to the current dislocations we are seeing in financial markets. This explains the ongoing attraction of assets that are both defensive and offer higher yields compared to other safe-haven investments,” Yosh Mendis concluded.