The Royal Agricultural Society of Tasmania was the big winner from the final commercial property portfolio auction of the year, which highlighted strong demand for retail investments leased to blue-chip tenants.
The River Room at Crown Casino had to be extended to accommodate the larger than expected crowd, with more than 40 parties registered as potential bidders for the Bunnings Warehouse ground lease at the Royal Hobart Showgrounds.
A four-hectare site, on which a 16,900-square-metre DIY warehouse was completed in 2015, it was eventually knocked down to an “institutional investor” for $14.06 million – more than $5 million above the reserve – on a record low yield for the asset class of 3.13 per cent.
The 196-year-old RAST had put the Bunnings site up for sale to help fund a proposed $150 million commercial development of the 17-hectare site with plans for a hotel, offices and medium-density housing.
RAST chief executive Scott Gadd said the result exceeded expectations. “We are over the moon. It means we can pay down debts of $4 million leaving $10 million in the bank. It sets us up beautifully,” he said.
The Bunnings was one of 19 properties offered for sale by commercial agents Burgess Rawson as part of its 125th portfolio auction.
Reflecting tighter funding conditions, the auction generated a mixed bag of results with 10 out of 19 properties selling under the hammer – a clearance rate of 53 per cent – but also a number of standout individual results
Market performing strongly
Alongside the Hobart Bunnings, a Coles Supermarket in Hamilton, a large agricultural town 300 kilometres west of Melbourne, sold to a private investor for $23 million on a yield of 5.2 per cent.
The 2015-built, 3870-square-metre store, with 17 years left on the lease, was offered for sale by the Rawson family, who co-founded Burgess Rawson in 1976, and co-investors the Curry family.
Burgess Rawson director Shaun Venables said these results indicated the market is still performing strongly for quality commercial assets.
“With changing market conditions, today’s attendance and results demonstrated that AAA properties with strong lease covenants and well-known tenants are always favourable in any market,” he said.
“The 2018 year has finished on a solid note for commercial property despite continued negative press about the property market generally. Burgess Rawson transacted over half a billion in commercial asset sales this year at its portfolio auctions.”
Other properties to sell under the hammer was a Perth 7-Eleven petrol station and convenience store with a new 15-year lease, which was knocked down for $7.2 million on a 6 per cent yield, and NAB branch in the centre of Ballarat, which fetched $6.52 million on a yield of 5.3 per cent.
However, a Woolworths in Kyabram was passed for $18 million and a childcare centre in Ballarat also failed to sell under the hammer.