Buy a Bunnings store without the Bunnings price
Tell an investor a property leased to Bunnings Warehouse is for sale and immediately they’ll be expecting to pay big bucks for a tight yield.
Just last week an investment group paid $180 million for four properties with highly-prized Bunnings lease covenants, and stores leased to the hardware giant regularly fetch well over $10 million, and as high as $40 million-plus.
The high prices investors are prepared to pay mean yields are almost always small, and have been known to dip below 4%.
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So it comes as no surprise that interest has been high in a Bunnings-leased property in Adelaide that’s expected to sell for less than $5 million and on a yield of 6-7%.
Why? It’s a Bunnings Trade store, which caters predominantly to the tradesman market, rather than to the general public like a traditional outlet.
Not that it makes the store at 89 Cavan Rd, Gepps Cross, any less appealing to investors, with the lease potentially running until 2046 and returning more than $300,000 per annum, with 3% annual increases built in.
Colliers International agent Paul Tierney says interest in the property has been significant, with one investor putting forward an offer within days of the campaign launch.
“We received an offer two days after the start of the campaign, but we are taking the property to auction because of the interest level we’ve had,” Tierney says.
“Despite the pretty good offer we’ll run the process through to auction.”
Purpose-built for Bunnings in 2014 and leased until 2021, with an additional five five-year options, the Trade store is located 11km north of the Adelaide CBD and is one of only two in the city.
“There’s only two in Adelaide – one in the north and one in the south,” Tierney says.
The store sits on an almost 10,500sqm site, of which 36% is occupied by the Bunnings building. There is an additional smaller tenancy at the rear of the property, which returns around $45,000 a year and is leased until 2019.
“We’re expecting something in the high $4 million range,” Tierney says.
“Because it’s a Trade centre not a store, the expectation is around the high 6% to 7% (yield) range. It’s the right size for mum and dad investors and small syndicates. We’ve had interest predominantly locally but also some national interest.”
The property will be auctioned on-site at 11am on Thursday, December 7.