Charter Hall buys Bunnings in Nowra on 4pc yield
Fund manager Charter Hall has bought a new Bunnings warehouse in Nowra on the NSW South Coast for $65.3 million on a tight yield of 4 per cent, highlighting the sought-after status of the large-format asset and its secure tenant covenant.
The low yield – or return – equalled the 4 per cent benchmark set in November when New Zealand investor Cook Property Group bought a Bunnings Warehouse being developed at Hervey Bay in southern Queensland for $58.6 million.
The South Nowra Bunnings at 159 Princes Highway opened in January last year after being developed by Nowra Property Group, headed by well-known Bunnings syndicator Derek Lowe.
It offers just under 18,000sq m of gross lettable area on almost three hectares of land and includes parking for 428 cars.
Offered with 11 years remaining on a 12-year lease to Bunnings, a subsidiary of retail giant Wesfarmers, the Nowra store was acquired by the Charter Hall Direct Industrial Fund No.4 (DIF4), which holds a $2.5 billion property portfolio.
The acquisition highlights the increasing crossover between retail (now often seen through the lens of last-mile logistics) and industrial property investment mandates, driven by the growth of online shopping and innovations like click-and-collect. As its name suggests, DIF4 traditionally invests in “quality industrial properties”.
The Nowra Bunnings deal comes after another Charter Hall fund, the ASX-listed Charter Hall Retail REIT, which mostly owns neighbourhood and sub-regional shopping centres, bought a half-share in a Coles distribution warehouse in Adelaide for $111.8 million in 2020. CQR chief executive Greg Chubb called it “a logical extension” of its convenience retail focus.
Charter Hall Direct fund manager Julian Menegazzo said the acquisition of Bunnings Nowra was in line with DIF4’s strategy to invest in “quality properties in premium locations with high capital growth potential and long weighted average leases”.
The Nowra acquisition takes the number of Bunnings warehouses across the Charter Hall platform to 66, worth almost $3.7 billion.
The sale of Bunnings Nowra was brokered by Sam Hatcher and Nick Willis from JLL.
“Large format Bunnings stores remain very competitively sought after by a majority of buyer types as they are arguably one of the most secure covenants in Australia,” Mr Hatcher said.
Since the onset of the pandemic, there had been over $1.2 billion of Bunnings transactions, Mr Willis said.
“This level of investment activity is being driven by the increasing weight of capital locally and offshore seeking exposure to both Bunnings and supermarket-based assets,” he said. “However, supply is becoming increasingly constrained which is driving [yield] compression in the sector.”
Bunnings Nowra features a large main warehouse, a timber trade sales area with a five-lane timber drive-through, outdoor nursery and landscape yard, and a cafe. It was built at a cost of $28 million.
