Boutique property funds manager Fawkner has continued to add to its essential service property trusts, picking up 31 fuel and convenience outlets from ASX-listed Waypoint REIT (WPR).
Fawkner has paid $113.9 million for the petrol station portfolio, 29 of which—at a combined purchase price of $102.7 million—will settle in three tranches by the end of October and the remaining two assets 10 days after WPR is able to provide clear titles.
The urban and regional petrol stations, leased to listed fuels supplier Viva Energy Group, are in NSW, South Australia, Victoria, Queensland, Western Australia and the Northern Territory.
The portfolio was sold at a 10 per cent premium to its December book value. It follows a gross valuation uplift of $189.8 million across Waypoints 388 locations after independent valuations.
Fawkner will now place the first two tranches of assets with its Essential Services Trust No.18, anchored by Perth mall The Square Mirrabooka which it purchased for $195 million in June, with the remaining tranche to be added thereafter.
The trust—with a WALE of 5.25 years—offers investors a 7 per cent annual yield, paid monthly, with average rental increase of 3 per cent.
The Melbourne-based fund manager currently operates 18 essential services-themed property trusts which collectively manage more than $1 billion in assets providing its returns to 350 wholesale investors.
Its main areas of focus are non-discretionary retail, childcare and roadside retail—assets with potential for rental growth, with average gross specialty rents sitting well below benchmark.
The non-discretionary nature of fuel sales and the stable demand profile of fuel consumption has made the asset class defensive option throughout the pandemic.
Fund managers have been quick to pivot investment towards assets with quality tenants and upside potential.
Service stations have also recorded significant yield compression in recent years driven by a number of underlying themes.
These include the retail expansion of service stations to include fast-food operations and convenience stores as well as the rise of domestic travel.
Service station assets also continue to offer long-term optionality for landlords via residential or mixed-use development, particularly in key metropolitan locations.
WPR chief executive Hadyn Stephens said the continued strong demand at present for fuel and convenience assets had provided a compelling opportunity for the group to realise attractive prices for non-core assets and improve overall portfolio quality.
“WPR maintains a strong financial position to capitalise on investment opportunities that may arise ... noting that selective acquisitions and reinvestment in our core portfolio remain key components of our strategy moving forward,” Stephens said.
Earlier this year, APN Convenience REIT snapped up a portfolio of six service stations, anchored by 7-Eleven outlets in south-east Queensland in a $59-million deal, highlighting the appetite for the asset class.
The petrol stations, acquired on an average yield of 5.5 per cent, were acquired from Bluepoint Property, which developed the outlets between 2014 and 2017.
That deal pushed APN Convenience Retail REIT’s portfolio to 97 properties valued at $620 million.