Returns from service stations appear to be increasingly attractive for property investors.
This is reflected not alone in two properties which came to the market last week in counties Kildare and Galway, but also in some recent sales.
A newly constructed petrol station at Millennium Park in Naas in Co Kildare, let to Applegreen, is being offered for sale with a guide price of over €4.75 million. According to Natalie Brennan, senior director of Capital Markets Ireland at CBRE who is handling the sale, the guide price would equate to a net initial yield of 6 per cent.
Meanwhile in the village of Kilcolgan in south east Galway, a neighbourhood centre with a Circle K service station as the anchor tenant, has been brought to the market quoting more than €1.95 million. Sarah Winters of sales agent TWM said this would provide a net initial yield of 9.8 per cent.
The Millennium Park service station extends to about 393 square metres on a 1.41 acre site. It has a forecourt and canopy, four double-sided petrol pump terminals, a car and jet wash as well as heavy goods vehicle fast filling pumps. Internally the premises is fitted out to a high specification, typical of an Applegreen, with a Bakewell Café, a Burger King and delicatessen as well as a general shop and seating area.
Let to Petrogas Ltd trading as Applegreen, its lease extends to 25 years subject to inflation-linked rent reviews. The annual rent for the first five years is fixed at €310,000 per annum and increases to €360,000 per annum from year six to ten. There is a tenant break option at years 15 and 20.
Petrogas operates more than 193 service stations across Ireland and has diversified into Britain and the US. Millennium Park’s business occupiers include Kerry Group, HSE and AIB and it has access via the M7 to the M9, M8 and M4 national traffic arteries.
Brennan said that this type of property suits the demand from investors who seek investments in the €5 million to €10 million price range and who require long term income and good quality covenants. Similar investors seeking retail prospects accounted for 15 per cent or more than €300 million of the overall investment in the Irish market during the first half of 2019.
The Kilcolgan neighbourhood centre extends to over 2,780 square metres and as well as the filling station comes with 14 commercial units laid out over three blocks on a three acre site.
The centre offers a mix of local retailers and businesses with tenants including Mother Hubbards, Bar One Racing, Doc Fitness, Ken Horan Motors and Q-Beauty, a barber and car wash operator. It currently produces annual rents of €208,960 with potential to increase income through letting of the vacant units and asset management.
At ground floor level there are three vacant units with a combined of 158 square metres and two first floor vacant units extend to a combined 201 square metres.
Winters said that based on the guide price equating to a capital cost of less than €700 per square metre, this is significantly less than reinstatement costs for a development of this nature.
“Such an investment is underpinned by its busy location and the fact that about 56 per cent of total income is from Circle K, providing good secure income for investors,” she said.
Located close to the junction of the of N67 and R458, this Galway, Kinvara and north west Clare road, is a busy tourist route.
Another Applegreen service station investment near Naas is also on the market. Located on the Sallins Road near Kildare town, agent Coldwell Banker is guiding €1.9 million. With an initial rent of €130,000 a year, this equates to an initial gross yield of 6.84 per cent. This will rise to €145,000 in 2021 and from 2026 there will be rent reviews every five years at market rents. The 21-year lease dates from October 2016 with no break until October 2031.
Sitting on about one acre, the two-storey building accommodates a 270 square metre convenience store with off-licence, a deli with seating area and toilets, an ATM, self-service Launder-Mat, Parcel Motel, automatic truck refuelling, stores, workshop, office and staff facilities.
Last month, another Applegreen service station sold for its €950,000 guide price at a BidX1 auction, but it stands on a much smaller site of 0.27 acres and does not have the range of facilities of the other sites. Located near the centre of Tullamore, Co Offaly, it generates annual rent of €95,000 plus Vat. This suggests a gross 10 per cent yield. Its lease will run until 2037.
In March 2018, a private investor bought a service station for €500,000 or €150,000 over its €350,000 guide price at a Sherry FitzGerald auction. Located on 0.559 acres at Ryland Road, Bunclody, the main N80 road which links Carlow and Wexford, the Applegreen station generates annual rent of €48,000 while two apartments on the site generate €12,720 per year which suggests a gross initial yield of 12.14 per cent.
In September 2017, another Applegreen service station known as Tralee Food Court in Mile Height Retail Park, Rathass in Tralee, Co Kerry was bought by a private Irish investor for €1.685 million or 18 per cent more than its €1.425 million guide price. At the time it had a current rent reserved of €130,000 suggesting a gross yield of 7.72 per cent. Extending to 405 square metres, the ground floor comprises three separate restaurants.