Bunnings sale to Charter Hall sets new yield benchmark
Charter Hall has set a new benchmark for Bunnings retail warehouses after acquiring a brand new 16,000-square-metre outlet in Melbourne’s south east on a yield of 4.5 per cent.
The funds management giant paid $42.3 million for the freestanding Bunnings on Berwick-Cranbourne Road, Clyde North which opened in September 2019.
It sold with a 12-year net lease back to Bunnings. The hardware retailer developed the warehouse within MAB Corp’s Element Park, a 30-hectare master planned business and retail park.
Insiders said the yield was 50 basis points lower then recent comparable Bunnings sales and would recalibrate values for the asset class, which is highly sought after by both institutional and private investors.
A spokesman for Charter Hall declined to comment.
It was the second Bunnings acquired by the ASX-listed fund manager in the space of a few months.
In November, the Charter Hall Direct Consumer Staples Fund paid $35 million for a 5000-square-metre multi-level Bunnings in Perth. The yield was not disclosed, but would have been within range of the fund’s distribution yield of 6.9 per cent.
Last year, Melbourne’s Durlacher family paid $21.3 million for a recently built 10,000-square-metre Bunnings warehouse in Victor Harbor, south of Adelaide with the deal struck on a 5.13 per cent yield.
Though not a directly comparable transaction, in December 2018, the ground lease for a 16,900 sq m Bunnings at the Royal Hobart Showgrounds sold for $14.06 million on a 3.13 per cent yield – $5 million above the reserve.
Bunnings, which is owned by Wesfarmers, said the Clyde North Warehouse was the first of its large-format store sold on market in metropolitan Melbourne since 2015.
Bunnings’ director of property, Andrew Marks, said the interest in the sale reflected the continued strength of the Bunnings covenant.
“This Bunnings Warehouse is ideally situated to support the rapid and ongoing growth occurring on the south eastern fringe of Melbourne. We’re continuing to see interest from investors who are attracted to Bunnings assets due to the quality of our sites and the performance of our business.
“We are pleased to have completed another successful sale at a yield that is reflective of the market and on lease terms that take into account our long-term operational objectives,” Mr Marks said.
The sale was marketed by CBRE’s Justin Dowers and Mark Wizel.
“The level of interest and subsequent bids that were received within the campaign was significant. It is a combination of the lower cost of debt driving investors towards secure long WALE assets, as well as confidence in Bunnings as a tenant off the back of 25 consecutive years of revenue growth,”Mr Dowers said.
