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Buoyed by strong conditions in its $4.8 billion convenience retail portfolio, Charter Hall Retail REIT (ASX: CQR) has picked up four Bunnings stores in Queensland and NSW for $151 million.
The outlets, which have been secured with lease terms of up to 10 years, are located at Goulburn in NSW and Toowoomba, Airlie Beach and Cairns in Queensland.
Charter Hall Retail, which controls a portfolio of 699 properties with convenience retail centres valued at $2.9 billion of its total asset pool, says the Bunnings properties will provide earnings and internal-rate-of-return accretion for the trust’s portfolio.
The properties have been acquired with fixed annual rent reviews of between 2.5 per cent and 3 per cent.
“These acquisitions extend CQR’s net lease position into the hardware sector, which complements CQR’s convenience retail strategy,” says Charter Hall Retail CEO Ben Ellis.
“CQR already owns Bunnings assets adjacent to our existing, highly productive convenience shopping centres.
“This recent move towards investing in net lease hardware assets on stand-alone sites highlights our ambition to continue to grow CQR’s net lease convenience retail portfolio.
"Bunnings is a strong Australian brand, and the national hardware industry is set for growth as Australia’s population and urban footprint continues to grow.”
Charter Hall Retail notes that all four Bunnings properties are located in established regional centres on large land footprints with low site coverage, making them difficult to replicate.
Passing rents on these properties have been assessed to be on average 15 to 20 per cent below market levels.
The acquisitions have led Charter Hall Retail to lift its FY26 earnings guidance from 26.3c per unit to no less than 26.4c per unit, which the trust says will provide at least 4 per cent growth over FY25.
The property investor has also lifted its FY26 distribution per unit guidance to 25.5c per unit, which represents a distribution yield of 6.1 per cent.
Charter Hall Retail chairman Roger Davis told unitholders at today’s annual general meeting that consumer spending in convenience retail has remained resilient over the year and that the group’s portfolio has enjoyed “some of the strongest operating statistics in its history, with occupancy, leasing spreads, supermarkets in turnover and footfall across the portfolio all performing strongly”.
“Our portfolio of net lease and shopping centre convenience retail assets continues to deliver a highly defensive and resilient income stream,” says Davis.
“We were very pleased to close the HPI transaction during the year, which further bolsters our net lease retail position and materially enhances our forecast earnings growth.”
Charter Hall Retail and industry super fund Hostplus wrapped up a hostile $766 million takeover of Hotel Property Investments (HPI) earlier this year, a deal that led the investment group to report a valuation boost of 4.9 per cent on the HPI assets by the end of FY25.
“The convenience retail property sector appears to be moving towards a period of sustained, and potentially, above market average, capital growth due to strong demand for convenience retail property,” says Davis.
“This strong rising demand for investment in the sector is occurring concurrent with very strong population growth and a multi-decade low forecast supply of assets.
“These factors combined are likely, in the board’s view, to see a positive market environment for CQR in the years ahead.”
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