Metro Bunnings sells for $48.8m amid hot demand from investors

An Adelaide Bunnings has sold for $48.8 million amid pent-up demand from private and institutional investors chasing the highly sought-after hardware investments and ‘pandemic-proof’ assets.

Property investment group Charter Hall snapped up Bunnings Munno Para West, adding to its large portfolio of warehouses leased to the hardware retailer.

The Colliers team behind the sale said the first metropolitan Bunnings Warehouse to be publicly marketed since 2019 generated competitive bidding, driven by pent-up demand from private and institutional capital.

The agents had expected interest in the Munno Para West site in the vicinity of $45 million and it sold for $48.8 million on a yield of 4.25%, setting a new benchmark for South Australian Bunnings Warehouse investments.

Colliers said the strong result was achieved despite the public expressions of interest campaign being conducted during lockdown conditions in a number of states.

Private investors and funds continue to focus on hardware investments with a strong covenant, given their defensive and ‘essential services’ nature, said Chris Maher, director (Queensland) of retail investment services at Colliers.

“We are experiencing unprecedented demand from investors seeking to deploy capital into ‘pandemic-proof’ assets with strong underlying land value, long-term income growth and covenant security,” Mr Maher said.

“The growing demand of institutional and private capital targeting this asset class resulted in competitive bidding and ultimately an offer secured ‘on contract’ having due diligence completed prior to the close of the EOI, and all during lockdown conditions.”

Bunnings continues to be one of the most hotly-contested retail investments. Picture: realcommercial.com.au/for-sale

James Wilson, national director (NSW) of Colliers retail investment services, said Bunnings continued to be one of the most hotly-contested retail investments in the current market conditions.

“Established funds and private investors are facing growing competition from emerging groups targeting the attractive Bunnings Warehouse net lease covenant, as highlighted by the competitive bidding received for the Bunnings Warehouse Munno Para West campaign,” Mr Wilson said.

“Colliers have announced over $230 million in value of Bunnings Warehouse transactions nationally already in 2021, with all metropolitan and non-metropolitan transactions reporting core cap rates below 5%.”

The Colliers agents said single-tenanted large format retail assets, particularly hardware, are in strong demand.

Eleven Bunnings Warehouses have changed hands so far in 2021, which is already as much as the entire 2020 period, they said.

Only three have been sold publicly this year: Bunnings Munno Para West; a newly-opened Bunnings in Queensland’s Plainland, sold for $22.2 million by Burgess Rawson in June; and a Bunnings in the NSW town of Young, sold by Colliers for $11 million in May.

Bunnings Munno Para West is only the third Bunnings investment to be sold publicly this year. Picture: realcommercial.com.au/for-sale

A new Bunnings investment – located in Kempsey, on the NSW mid-north coast – just hit the public market, also through Colliers.

On completion, the warehouse will feature a total lettable area of about 11,000sqm with the investment secured by a new 10-year lease with annual rent reviews.

The Kempsey property is being sold via a ‘fund-through’ structure, where a developer sells the development before completion.

Charter Hall expands Bunnings portfolio with SA buy

Charter Hall, which started buying Bunnings stores in 2006, has secured a number of the warehouses recently with the biggest deal being its November acquisition of a $353 million portfolio of six Bunnings assets.

It now owns more than 60 Bunnings sites after the Munno Para West deal and its $49 million acquisition of another property in Baldivis, 45km south of Perth, in July.

One of Charter Hall’s unlisted property funds, its Direct Industrial Fund No.4, bought the Adelaide property from the Cromwell Direct Property Fund, which is managed by real estate fund manager Cromwell Funds Management.

Charter Hall said the acquisition was in line with the fund’s strategy of securing high-quality industrial properties positioned near major transport infrastructure, and provided a long-weighted average lease expiry investment with a strong tenant covenant while deepening the group’s existing relationship with Bunnings. 

Charter Hall Direct CEO Steven Bennett said the deal followed a year of significant growth for the fund, which had doubled in size since July 2020, and built on its momentum in the industrial and logistics sector.

“DIF4 has completed $230 million in acquisitions over the past three months and $1 billion over the past 12 months, demonstrating the ability for the fund to deploy capital in a highly sought-after asset class that provides accretive returns,” Mr Bennett said.

Charter Hall head of industrial transactions Jack Walters said industrial and logistics continued to be a highly attractive sector for the group.

“In particular, we have been active in acquiring properties leased to tenant customers in the essential services and non-discretionary asset classes, which have continually demonstrated to be a resilient and defensive investment and served all of our funds very well,” Mr Walters said.

The 16,936sqm warehouse is on a prominent 41,060sqm corner site in a booming urban growth corridor of Adelaide, 38km north of the CBD.

Colliers’ national director of South Australian investment services Alistair Mackie said Bunnings Munno Para West is the largest freestanding retail investment to be publicly marketed in the state for some time.

“The campaign highlighted the significant amount of unsatisfied local high-net-worth investor and fund capital looking to be placed into the local South Australian market,” Mr Mackie said.