Join Australia's most dynamic and respected property investment community

Should I buy a Bunnings Warehouse?

Discussion in 'Commercial Property' started by Beelzebub, 11th Aug, 2015.

  1. Beelzebub

    Beelzebub Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    568
    Location:
    Lost
    Check this article out: http://www.news.com.au/finance/mone...mercial-property/story-e6frfmdr-1227479316459

    Makes you want to bang your head against a wall. Apparently a 5.1% yield is impossible in the residential market.

    Anyway, it seems silly to spend $10 million on a Bunning's Warehouse for a 5.1% yield. If that place goes bankrupt or decides to relocate you're stuffed. One near me recently upgraded to a larger store; I always wonder about the landlord who owns the old one. Occupied by a car dealer now, but I doubt they would be receiving the same rent as they were.

    Does anyone disagree, and think buying a Bunnings with a 5.1% yield is a good idea?
     
  2. S.T

    S.T Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    428
    Location:
    I'm not selling anything
    All depends on the lease terms.
     
  3. pinkboy

    pinkboy Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    912
    Location:
    Mackay, Qld
    You only have to look at Burgess Rawson auction results. Even sub 5% yields for bank premises etc. Crazy.

    I've seen Bunnings move twice in my hometown.

    pinkboy
     
  4. FireDragon

    FireDragon Well-Known Member

    Joined:
    31st Jul, 2015
    Posts:
    171
    Location:
    Australia
    With 5% yield for commercial properties, I will only buy it if it has development potential. I was looking at a retail property on Hassell St in Parramatta asking for around $2.3M back in 2012. 450sqm corner block 6% yield. I remember it has 8:1 FSR but I didn't buy it as I didn't think it can satisfy the car space requirement. The owner somehow managed to get the DA approval for 30 units and sold for $5.5M last year.
     
    MBO and legallyblonde like this.
  5. Ben Chifley

    Ben Chifley Well-Known Member

    Joined:
    9th Aug, 2015
    Posts:
    192
    Location:
    South Australia
    They seem to move frequently in my opinion; the one in Cheltenham (VIC) moved to a new site last year; Altona and Ballarat have also relocated in the last few years.
     
  6. Bran

    Bran Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    3,217
    Location:
    At work
    I'd put my 23 million dollars, then 10 million dollars elsewhere.
     
  7. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,516
    Location:
    Sydney
    Yep, seems like the doctor's got more dollars than sense.
     
  8. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    902
    Location:
    Melbourne
    You don't need to buy the properties directly.
    You can buy in $500 chunks through BWP which owns 80 stores and listed on the ASX.
    WALE is 6.6 years.

    http://www.bwptrust.com.au/IRM/content/default.aspx

    The Y-man

    NOTE: not a recommendation!! I may have or may have had these in my portfolio.
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,558
    Location:
    Sydney or NSW or Australia
    .

    LPTs often sell below MTA as they're not fully understood by the market.

    I saw a syndicate for a commercial building in Parramatta yesterday - 8% yield. Possibly ok for a SMSF as a medium term holding but no exit strategy for 5 yrs.
     
  10. spludgey

    spludgey Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    679
    Location:
    Sydney
    If you had $10M, would it really matter whether you'd get $510k pa or $750k pa?
    both are still way more than I could spend. Plus Bunnings would probably make for an easy tenant.
     
    Ben Wilkie likes this.
  11. Fargo

    Fargo Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    234
    Location:
    Vic
    That Bunnings store in Swan Hill is relatively small the smallest I have seen has less product range, has very narrow aisles, limited parking and no room for expansion, I would expect in 10 years when the lease expires they will be looking for a larger site.
     
  12. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Steve McKnight talks about using value add to residential property, like renos, sub-dividing, development to increase your funds and then eventually moving into commercial property. Why bother if you're getting as good or better return on your residential properties?
    The good doctor should know that commercial property value/yield is different to residential property.
     
    MBO likes this.
  13. sanj

    sanj Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,145
    Location:
    Perth
    Why bother? Maybe because he wants an easier investment. Imagine how many propertiirs youd need to have to get 500k a year in rent if they were each paying 500/week. What a bloody nightmare

    The yields here certainly seem low but ultimately this guy is collecting well over $1m a year passively from a very strong tenant, he likely and probably justifiably doesnt give a damn what any of us think
     
    charttv and spludgey like this.
  14. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Meow! Skipped brekkie sanj?
     
  15. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    902
    Location:
    Melbourne
    Sounds like 2 Wentworth St?

    The Y-man
     
  16. sanj

    sanj Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,145
    Location:
    Perth
    Not at all, i did include myself jn the group of people whose opinions dont matter to the buyer.

    He owns over $30m of property, get morerent than he can spend and lrobably spends as much time on it as someone who owns 1 or 2 resi properties.
     
  17. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Sure, he's rolling it in. But as a percentage it's not great, I'd be wanting to be doing better than a return of 5% on $30m.
     
  18. sanj

    sanj Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,145
    Location:
    Perth
    So would i but it all depends on your age, goals and what else your portfolio is doing.

    As it grows bigger and bigger youre likely to accept lower yields with less risk as theres already way more being generated than youd need.
     
  19. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    But if you were worried about the risk, you could just put it in the bank and live off the... oops, wrong decade ;)
     
    BigL, York, HappyCamper and 1 other person like this.
  20. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,516
    Location:
    Sydney
    Actually, it's not that bad.
    Less than 10 minutes/week is all it takes.