Investors get hungry for high yields, long leases and brand names of fast-foods premises

There are a growing number of investors using their self-managed super funds (SMSFs) to purchase fast-food outlet premises, attracted by the opportunity to earn rental yields as high as 8%.

This follows a number of recent sales of fast-food outlets, including a Red Rooster on Murray Street in Colac that sold for $1.3 million with a yield 7.16%.

Burgess Rawson agent Jamie Perlinger, who sold the property, believed that the brand name played an important part in the sale, as well as the long lease term.

“It was two things, the brand and the 15-year term,” he tells Property Observer.

Other recent fast-food outlet sales include a 440-square-metre Hungry Jack’s in Corio, Geelong, which sold at auction in August for $1.9 million with a yield of 7.83%. The Hungry Jack’s lease runs until 2017 with multiple renewal options and brings in rent of around $153,000 per annum.

A combined Subway and KFC outlet in Riverstone, NSW, measuring 778 square metres was also sold for $1.3 million, with a yield of 6.7%. Both fast-food outlets are on long leases bringing in net income of $88,000 per annum plus GST.

Both were marketed by Burgess Rawson.

“There has been a lot interest in properties between the $1 million and $2 million price bracket. A lot of investors are after that kind of price and have been interested in investing through their self-managed super funds,” says Perlinger, who believes that yield rates of between 7% and 7.5% on these properties would remain steady over the coming months.

A combined Red Rooster and Souvlaki Hut premises is currently on the market. It is at 40 Princes Highway, in the small town of Traralgon in Victoria.

The 372-square-metre premises is leased by the fast-food chain on 10-year lease with rent of around $178,000 per annum.

Traralgon is the retail capital of the Latrobe municipality, with a trade catchment in excess of 70,000 people.

The property is for sale by private treaty, with the listing held by Raoul Holderhead and Jamie Perlinger of Burgess Rawson in conjunction with Ted Addison and Matt Addison of Addison Real Estate.

It last sold for $2.46 million in October 2010 with estimated annual rent of $200,000 – a gross yield in excess of 8%.

Another two KFC premises have been listed for sale by Burgess Rawson, the KFC in Casino in NSW’s Northern Rivers region and the KFC Mona Vale. Both are on long leases and will be auctioned on October 30 through Burgess Rawson the listings agents.

This article first appeared on Property Observer.