Investment with security and longevity

A modern childcare centre with a new, long-term lease to a publicly listed tenant with a multi-million dollar market capitalisation is now on the market on Auckland’s North Shore. 

Peter Kermode of Colliers International, who with colleagues Shoneet Chand and Jimmy O’Brien is marketing 71 Roseberry Avenue, Birkenhead, for sale by auction at 11am on Wednesday 28th October 2015 (unless sold prior), says the strong tenant covenant and attractive lease terms make this an appealing long term investment.

“The freehold, two-level complex is leased to Evolve Education Group (EEG), trading as Lollipops, on a new 15 year lease that starts this month. The lease currently generates a net annual income of $134,160 and offers investors annual, fixed increases of 2.5% and then reviews every five years to market.

“EEG is a New Zealand owned and operated provider of high-quality, multifaceted Early Childhood Education services operating under various brands including Lollipops Educare, PORSE and Au Pair Link.”

EEG has more than 86 centres nationwide and is listed on the New Zealand Stock Exchange with a market capitalisation of approximately $150 million at the time of writing.

There are also two right of renewal periods of five years each with the lease and all outgoings are paid by the tenant. A hard ratchet clause is part of the agreement says Kermode.

“Hard ratchet means the rent cannot fall below current rates.  This paired with all outgoings being paid by the tenant reflects positively for investors as rent can never go down while the high level of quality is maintained by the tenant.”

The fully subscribed childcare business is licensed for up to 60 children and currently has a waiting list until June next year, says Chand.

“EEG’s stated objective is to become the leading provider of Early Childhood Education services in New Zealand, and it is committed to providing education and childcare services that are second to none.

“Government funding to Early Childhood Education has also increased significantly over the last eight years signalling a shift in prioritising early education services. 

“Early education has emerged as an essential service and accordingly, we should continue to see exponential growth in demand for quality service providers.”

Chand says with a potential final expiry lease period of 2040, the childcare centre offers certainty of location, which is invaluable to surrounding families, and affords prospective investors even greater confidence.

The original, 1982, concrete block base, timber floor building was comprehensively redeveloped and modernised in 2008 for its conversion to a childcare centre.

The 634 sqm property is split over two levels, each with its own, generous, covered outdoor areas.

The decking has a waterproof membrane beneath AstroTurf which creates a weatherproof covered outdoor area over the lower level outdoor play area. Exterior cladding is a mix of brick and ply with aluminium joinery and long run iron roofing.

O’Brien says the property has an ideal setting and sought-after north facing aspect for its use as a childcare centre.

“Roseberry Ave is a quiet street running through a lush, north facing valley and is characterised by stand-alone residential houses.

“The site is also surrounded by a small ring road providing generous public car-parking right at the doorstop.

Birkenhead is a well-established suburb just six kilometres northwest of Auckland’s city centre.

View Listing Here

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