Yield benchmark reset as Bunnings sells retail warehouse in SA for $21m

A Melbourne-based syndicate has bulked up its retail property portfolio after buying a recently built Bunnings warehouse in Victor Harbor, south of Adelaide, for $21.3 million.

The 10,000 sqm DIY warehouse, which opened last year next to a new Coles supermarket on Adelaide Road, sold on a yield of 5.13 per cent.

Property records show the buyer is VH Property Holdings, a company owned by Melbourne’s Durlacher family.

The Durlachers were also investors in another vehicle, Bairnsdale Property Holdings, which bought a Bunnings in East Gippsland, Victoria for $12.42 million in 2017 on a yield of 5.66 per cent.

The Bunnings DIY chain is owned by ASX-listed Wesfarmers, which last November spun off supermarket group Coles into a separately-listed entity.

The new Bunnings and Coles in Victor Harbor were developed on a 6.3 hectare site on Adelaide Road, McCracken by Coles Property Group with the Bunnings opening in June last year and the Coles in December.

Burgess Rawson director Billy Holderhead negotiated the off-market sale of the Victor Harbor Bunnings, which came with a lease in place until 2031.

He said the sale set a new yield benchmark for a Bunnings warehouse in South Australia.

“Bunnings-leased properties remain a top priority for property investors of all types, and particularly in South Australia, where stamp duty has been abolished.”

Mr Holderhead said yields for Bunnings freeholds continue to compress because of a “critical lack of supply”.

A recent example of this was the sale of a 25-year ground lease to a Bunnings in Glenorchy, Tasmania on a yield of 3.13 per cent and more than $5 million above the reserve price.

Bunnings director of property Andrew Marks said: “We continues to see significant demand for Bunnings assets driven by the quality of our sites and the performance of our business.”

In another recent deal, prestige car dealer Nick Theodossi paid more than $25 million last year for a new, full-size Bunnings in Mernda in Melbourne’s northern suburbs.

A Bunnings in Kingaroy, Queensland is on the market and tipped to sell for about $14 million through Burgess Rawson following an expressions of interest campaign.

According to Burgess Rawson, only 22 freestanding Bunnings freehold investments have been offered for sale publicly since 2016.

Of these, 15 sites worth $283 million were absorbed into the private sector and seven were sold to major institutions such as Charter Hall and CBRE Global Investors.

Credit Larry Schlesinger, Australian Financial Review