Hardware trust buys its sixth Bunnings Warehouse for $75 million

Property investment manager Newmark Capital is on the hunt for more large format retail assets after snapping up its sixth Bunnings Warehouse for $75 million.

Newmark Hardware Trust has acquired its first Bunnings Warehouse in Sydney – a flagship store in Eastgardens – ahead of a possible stock exchange listing.

The trust now owns six Bunnings properties across the eastern seaboard, after a recent deal to develop a new $85 million store in Melbourne’s Preston.

“These are quality additions to the trust, providing long-term benefits to investors,” Newmark Capital general manager of funds management Stuart Fox said in a statement on Thursday.

“It demonstrates our commitment to the large format retail sector and our ability to secure quality assets in a competitive market while applying our disciplined approach to asset selection.”

Mr Fox added Newmark was exploring other opportunities in the sector “to acquire assets that meet our investment criteria”.

Bunnings Eastgardens is the trust’s second acquisition in NSW, adding to a Bunnings Warehouse in Lake Haven on the Central Coast.

The 14,920sqm Eastgardens store, which sits on a 2.3ha site, has been trading since June 2017.

The purpose-built property serves a large catchment area in Sydney’s eastern suburbs.

“It is a very attractive metropolitan location in an area where there are high barriers to entry for securing prime real estate,” Mr Fox said.

Newmark Capital paid $75 million for the Bunnings Warehouse in Sydney’s Eastgardens. Picture: Supplied by Newmark Capital

Colliers national director, retail investment services, James Wilson, who negotiated the $75 million off-market purchase that was settled on Thursday, said there was strong demand for Bunnings and retail investments.

“We are experiencing unprecedented demand for NSW retail investments from investors seeking to deploy capital in resilient assets with strong underlying land value, long-term income growth and covenant security,” Mr Wilson said.

“This is a benchmark result and reflects the growing demand of institutional and private capital targeting this asset class.”

In February, the Newmark Hardware Trust secured a deal with Bunnings to develop a new three-level warehouse covering 18,612sqm on a 2.05ha site in Preston.

The trust acquired the Preston land for $15 million in a deal negotiated by Mulcahy Butera and JLL, with Bunnings funding and managing the construction works through to completion.

The Preston Bunnings Warehouse, due to open in May next year, is expected to be valued at $85 million when completed.

The hardware trust, set up in 2014, also owns large format retail centres in Launceston in Tasmania, Warragul in regional Victoria and Maroochydore on the Sunshine Coast. All three centres are anchored by Bunnings, whose parent company Wesfarmers also owns Kmart and Officeworks.

The Newmark Hardware Trust now owns six Bunnings Warehouse properties. Picture: realcommercial.com.au/sold

Newmark has proposed merging the hardware trust with another of its property trusts that owns the Bunnings-anchored HomePlus Homemaker Centre in Melbourne’s Chadstone and listing the merged group on the ASX.

Thursday’s statement from Newmark said the company was still considering options for the future capital structure of the hardware trust.

“Newmark’s focus for the trust is acquiring secure and stable assets that add geographic diversity and strengthen our existing portfolio,” Mr Fox said.

“Investors have seen that with these recent Bunnings purchases, and our track record over many years.”

Bunnings stores in hot demand

The Newmark deals are the latest in several Bunnings acquisitions by institutional investors in the last six months, led by property investment management company Charter Hall which bought a $353 million portfolio of six warehouses in November.

Private investors and syndicates are also targeting Bunnings investments, which are rarely offered for sale publicly.

Bunnings Young is the first freestanding Bunnings to be publicly marketed this year. Picture: realcommercial.com.au/for-sale

The Bunnings Warehouse in the NSW town of Young is the first freestanding Bunnings to be publicly marketed in Australia this year.

Mr Wilson said Colliers was receiving strong investor interest in Bunnings Young, which was expected to be valued at more than $11 million.

“The lower price point for Bunnings Young has allowed increased purchaser competition from largely private investors and syndicators who typically are priced out of buying a brand new Bunnings Hardware investment,” Mr Wilson told realcommercial.com.au.

There has been strong demand for large format retail during the coronavirus pandemic, given the sector and retailers like Bunnings have benefited from the home improvement trend as people spend more time at home.