NZ investor pays $58.6 million for an unbuilt Bunnings

New Zealand investor Cook Property has paid $58.6 million for a Bunnings Warehouse under construction in Queensland amid strong local and international demand for the sought-after investments.

The sale generated a fierce bidding competition and set a record 4% national benchmark yield for a Bunnings Warehouse, selling agents from Stonebridge and Savills said.

There was significant interest across Australia and internationally in Bunnings Hervey Bay with more than 200 buyer enquiries received, the agents said.

Stonebridge partner Phil Gartland said private and institutional investors were targeting Bunnings assets.

“The Bunnings covenant and asset genre continues to come to the fore for savvy investors, being one of the most sought-after commercial real estate investments,” Mr Gartland said.

“This was certainly reflected in the depth of bidding across private investors, syndicates and institutional capital alike.”

Construction is underway on the 17,421sqm warehouse, which is due to be completed in late 2022.

An artist’s impression of the Bunnings under construction in Hervey Bay. Picture: Supplied by Stonebridge and Savills

Bunnings Hervey Bay was sold with a 10-year net lease to Bunnings Group, with options extending until 2080.

The quality of the site was contributing to the strong demand, Bunnings general manager of business development and property finance Garry James said.

“We continue to see demand for Bunnings assets driven by the quality of our sites and the strength of the Bunnings covenant,” Mr James said.

“The Bunnings Warehouse is ideally situated to support the growing area of Hervey Bay and we are pleased to have completed a successful sale at a yield that is reflective of the market on lease terms that take into account our operational objectives.”

Savills national director Peter Tyson said investor appetite for assets with long leases and quality tenants had increased.

“The campaign demonstrated a significant weight of interstate and overseas investors targeting long-leased secure returns underpinned by high-quality tenants,” Mr Tyson said.

“Bunnings is quite clearly one of the most highly sought-after lease covenants in today’s marketplace.”

REA Group economist Anne Flaherty said demand for Bunnings investments has increased during the pandemic given the hardware retailer’s strong performance.

“Commercial property investors are prioritising assets with high-quality tenants in place, especially where long lease terms exist,” Ms Flaherty said.

“Bunnings have cemented their reputation as a desirable tenant, particularly over the last year with spending on home renovations hitting record levels.

“Many investors have diversified away from assets such as offices in favour of more resilient, ‘pandemic-proof’ properties. This has resulted in increased competition for higher performing assets such as Bunnings.”

Investors have been targeting ‘pandemic-proof’ properties. Picture: realcommercial.com.au/sold

A dozen freestanding Bunnings Warehouse investments have been sold this year for more than $470 million in total.

Bunnings investments are rarely offered through a public sale, with Bunnings Hervey Bay only the fifth to be sold on-market this year.

Stonebridge partner Justin Dowers said the deal showed Hervey Bay was seen as a very desirable investment location, with strong forecast population growth that would underpin the location for Bunnings over the long term.

Cook Property is a private property investment company that has retail and office assets in Australia and New Zealand, including Bunnings Westgate in Auckland.

In September, a Victorian syndicate led by The Lowe Group paid $28.55 million for an 11,000sqm Bunnings being built at Kempsey on the NSW mid-north coast.

Property investment group Charter Hall added to its large portfolio of warehouses leased to Bunnings with the $48.8 million purchase in August of Adelaide’s Bunnings Munno Para West. Selling agents from Colliers noted it was the first metropolitan Bunnings Warehouse to be publicly marketed since 2019.

A Melbourne family paid $22.2 million for a newly-opened Bunnings in Queensland’s Plainland in a Burgess Rawson portfolio auction in June, while a Sydney-based private investor paid $11 million for a Bunnings in the NSW town of Young in May after an on-market campaign by Colliers.