Bunnings Warehouse sold to offshore Chinese buyer on record 5 yield
Bunnings Warehouse sold to offshore Chinese buyer on record 5% yield
| 6 September 2016
CBRE’s Victorian Retail Investments team has made Australian property history in transacting the first ever Bunnings Warehouse to an offshore investor from Shen Zhen, China, at a record breaking yield of 5%.
CBRE’s Justin Dowers, Mark Wizel, Kevin Tong and Joseph Du Rieu marketed the sale of the off-the-plan Bunnings Warehouse on the corner of Murray Valley Highway and Frank Drive, Yarrawonga. The warehouse is expected to be completed by the end of the year.
The Expressions of Interest campaign was a hotly contested process that yielded 10 offers to purchase the property, following engagement from over 110 interested parties.
The $11,590,000 sale is a landmark transaction on a number of fronts, being the first ever Bunnings Warehouse to be acquired a mainland Chinese investor in a deal likely to pave the way for further investment in the Victorian retail investment market from Chinese parties.
Furthermore, it is the first Bunnings leased investment in Victoria to sell on a sub 5% yield.
CBRE’s Mr Wizel said there had been a heightened level of engagement from Chinese investors throughout the 2016 calendar year in comparison to 2015. However, this was the first example of a group making such an aggressive play for an investment property with a long-term lease.
“In the past 18 months we have seen more offshore investor enquiries on retail investment properties than ever before, with Asian parties accounting for an average of 36% of the enquires on CBRE’s retail campaigns. It’s also noteworthy that offshore investors are enquiring on properties in regional locations and now have the confidence to buy in these area,” Mr Wizel said.
CBRE’s recent Retail Marketview research report highlighted that foreign buyers helped boost retail property tranactions in Australia to a record level in 2015 - with the total value of retail transactions being 20% higher than in 2014. Foreign buyers contributed to 27% of the total sales – compared to the historc average of 12% over the past 10 years.
Mr Dowers noted that buyer demand for a limited supply of investment grade retail properties was leading to further yield compression for sites in regional Victoria – particularly those with blue chip lease covenants backed by heavyweights such as Wesfarmers and Woolworths.
“With the current environment characterised by a lack of premium retail investment stock, we are seeing an increase in demand for assets located in regional towns which are experiencing population growth and benefiting from government investment,” Mr Dowers said.
“The overall lack of supply and improved confidence in these areas has seen the yield differential between metropolitan and regional investments reach the lowest point in the current cycle. With the current Australian 10 year bond rate below 1.99% for the first time in Australian history, we expect to see continued demand from both local and offshore assets.”
Mr Dowers added that the continued growth and strong performance of the Bunnings business was helping to drive interest in Bunnings Warehouse assets.
“We are continually hearing from buyers that they just want to own a Bunnings store,” Mr Dowers said.
The sale of Bunnings Warehouse Yarrawonga follows a series of recent retail investment sales including Woolworths Middle Brighton (3.77% yield), IGA Hoppers Crossing (5.34% yield), Officeworks Ballarat (5.19% yield) and BP Blackburn (3.61% yield).
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.