A local investor has purchased a brand-new Western Australian childcare centre for $5.2m, making it one of the first modern childcare centre transactions in nearly 12 months for the region, which has seen a lack of quality childcare transaction outcomes since 2023.

Located at 73 Kingsley Drive, Kingsley, the 650sqm centre is fully leased to ASX-listed Nido Early Learning, under a 20-year initial lease agreement.

CBRE’s Australian Healthcare and Social Infrastructure team of Sandro Peluso, Jimmy Tat, Marcello Caspani-Muto and WA Metroplitan Investment team of Chloe Mason and Derek Barlow managed the sale which achieved a yield of 6.0%.

“Sophisticated investors are now focusing on long-term gains and recognising the exceptional buying opportunities available in the marketplace, rather than being solely concerned with short-term yields and immediate debt costs.

In recent months, we have observed a significant reduction in higher yielding opportunities, as our sales team consistently witnesses yield compression across the country,” Mr Caspani-Muto said. 

“While we anticipate some level of yield compression in the WA market, it generally remains 50-75 basis points lower compared to the results achieved in VIC, QLD, and NSW. Achieving an outcome below the current cost of debt in this market is considered a positive result.”

Mr Peluso added, “Investors are no longer solely focused on surface-level analysis. They are now considering multiple factors, including depreciation, replacement cost, and comparing the return on investment in childcare centers to leaving their money in the bank.

"Our team has been successfully working with buyers and their accountants to navigate these factors.

"When assuming a standard childcare Loan-to-Value Ratio (LVR) of 60%, with suitable Interest Coverage Ratio (ICR) coverage, we are observing benchmark returns that are 15-30% higher on investor capital for newly built centers, once depreciation is factored in.”
 

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