Smithfield Property Group in the Media

Developer reaps child care rewards with 'let and forget, triple net’ mantra

Chris Herde, The Courier-Mail

IT was a calculated leap of faith for Smithfield Property Group to turn its attention to the childcare sector.

And two years down the track the move from suburban residential projects to childcare centre development is paying big dividends.

The Ascot-based development company now has a growing pipeline of inner-city childcare projects encompassing some 750 places and is secure in one of the boom sectors of the property market.

Managing director Anthony Doolin, who formed the company in 2008 with Andrew Shearer-Smith, said they had been watching the childcare space for a few years before making the move.

“We made the decision to embark on childcare developments midway through 2015 when the success of the suburban ‘cookie-cutter’ two-bed/two-bath residential unit market was starting to look dire due to predictions of an inner-city unit tsunami on its way,” he said.

“We’re still interested in residential, but we’re not sure of the form that the next ‘great thing’ needs to take. We also have a range of other retail and commercial projects in the pipeline.

“But childcare is here to stay and there’s nothing that stacks up against it in terms of its long term prospects of good yields.”

Smithfield renovate and reposition, build from scratch or readapt character properties. They then sign quality childcare operator to 15 to 20-year leases plus options and in the bargain they are up for the outgoings as well.

The company’s “let and forget – triple net” mantra will be tested next week when it puts its readapted 130-year old former Methodist church in Indooroopilly up for auction through Burgess Rawson.

With a long-term lease to Journey Early Learning, Mr Doolin believes the auction result could smash the 5 per cent yield mark.

“During 2017, the average childcare centre sale yield achieved in metropolitan Sydney has been 4.85 per cent and we are seeing strong evidence that Brisbane heading down the same path,” he said.

“We wouldn’t be surprised if this auction result surpasses the previous Brisbane sale yield record set in Banyo at 5.1 per cent.”

Smithfield development manager Reece Goode said increasingly residential developers were turning their focus to speculative childcare development on their low to medium density residential sites.

“This approach is fraught with issues due to both local authority and quality childcare operators being inherently sensitive to locational factors in their consideration of suitable sites,” he said.

“But a nicely presented, well located centre occupied by a quality operator on good triple net terms and it’s not a ‘kid factory’ – greater than 150 places – comes on market, then it’s a ‘no brainer’ from an investment perspective.”