A New Zealand investor, Cook Property Group, has bought a Bunnings Warehouse store being developed at Hervey Bay in southern Queensland for $58.6 million, in a deal that sets a new benchmark for yield.
Bunnings itself is the developer and vendor in the transaction that was struck on a 4 per cent yield.
The 17,421 sq m store is still being constructed and is due to be completed late next year. It has been sold on 10-year lease to Bunnings with options extending until 2080.
“We continue to see demand for Bunnings assets driven by the quality of our sites and the strength of the Bunnings covenant,” said Garry James, Bunnings’ general manager of business development and property finance.
“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.”
Institutional investors, high-net worth players and syndicators have been pushing yields tighter for strongly leased retail assets as they look to lock in secure returns.
Earlier this year, fund manager Newmark Capital added Eastgarden Bunnings in Sydney to its portfolio for $75 million on a 4.14 per cent yield. Last week, Newmark completed a $129 million raising for a portfolio of eight large format retail assets, leased mostly to Bunnings, ahead of a pre-Christmas float.
In June, a new Bunnings, built by a local developer, sold at Plainland, west of Brisbane, for $22.2 million on a 4.2 per cent yield, as part of a portfolio auction.
The Bunnings Hervey Bay transaction was jointly negotiated by Stonebridge’s Phil Gartland and Justin Dowers, and Savills’ Peter Tyson.
“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 reflectedin the depth of bidding across private investors, syndicates and institutional capital alike”.
The offering attracted more than 200 buyer enquiries with interest from interstate and overseas investors.
“Bunnings is quite clearly one of the most highly sought-after lease covenants in today’s marketplace,” Savills’ Mr Tyson said.