- The site was demolished in 2019 for the new building, which opened in January 2021
- Spending on households good is above pre-Covid levels
- Over $1.2B in Bunnings stores have changed hands in two years
The 147-167 Princes Highway in South Nowra site opened last year after being developed by the Nowra Property Group. The yield is 4%, believed to be among the tightest for this type of asset class.
11 years of the 12-year lease to Bunnings remains.
Along with the famous large main warehouse, the asset includes a timber trade sales area with a five-lane timber drive through along with an outdoor nursery, landscape yard, café and undercroft car parking for 428 cars.
The complex was previously demolished in late 2019 to make for the new building, which cost $27.8 million and opened in January 2021.
The deal was brokered by Sam Hatcher and Nick WIllis of JLL’s Retail Investments (Australia), with Mr Hatcher noting large-format Bunnings stores remain very competitive among major investors.
“Bunnings Nowra was transacted on an off-market basis to Charter Hall as they saw an opportunity to acquire a near new large format Bunnings with long term tenure,” he said.
“Bunnings Warehouses have been among the most highly sought-after real estate assets since the onset of the pandemic.
“The long leases appeal to investors seeking a defensive and stable income, particularly given the strength of the Bunnings covenant and underlying business performance.”
Sam Hatcher, JLL
Wesfarmers-owned Bunnings remains a strong tenant having enjoyed strong sales throughout the pandemic, with Bunnings recently reaffirming its position as the most trusted brand in Australia.
Presently, spending on households goods is 37% above pre-Covid levels, with homewares one of the biggest beneficiaries of COVID-related spending given the rise in home renovations.
$1.2B of Bunnings transactions in two years
Mr Willis noted that since the pandemic began in early 2020, there has been over $1.2 of Bunnings transactions, with 12 sales last year alone totalling just shy of $500 million.
In 2020, there were eight transactions totalling $701 million.
The largest owner of Bunnings is the Bunning Warehouse Properties Trust (ASX: BWP) who own 65 stores, with a portfolio valued at $2.92 billion.
However, the trust has been disinvesting in recent times, with a decline from 80 Bunnings Warehouses in 2017, and the current WALE for their entire portfolio sits at 4.3 years.
“This figure is bolstered by the $353.2 million portfolio acquired by Charter Hall Long WALE Hardware Partnership,” added Mr Willis.
“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.
“However, supply is becoming increasingly constrained which is driving compression in the sector.”
Charter Hall has already several major acqusitions this year across its funds, including the SPC factor in Shepparton. It’s Long WALE REIT also recorded strong performance for HY22, with $589 million in profit after tax.