Centuria Industrial REIT has completed its largest ever acquisition purchasing Telstra's Clayton data centre complex in Melbourne for $416.7 million.
The industrial precinct, which was listed last-May with the help of UBS' real estate team, is located on a 3.2-hectare site and houses 10 buildings including a pair of newly-built data centres.
The sale, underwritten by UBS and JPMorgan, is part of Telstra's wider T22 simplification strategy announced in June 2018, which aims to shore up its balance sheet and radically alter its product offerings.
The sale now means Telstra has monetised $1.5 billion, and is quickly honing in on its $2 billion goal.
The sale includes a “triple-net lease-back arrangement”, with Telstra retaining ownership of all IT and telecommunications equipment, as well as ongoing operations and responsibility for building upgrades and repairs, future capex requirements.
The lease is for an initial period of 30 years with two 10-year extension options.
To partially fund the acquisition is undertaking a fully underwritten equity raising at $3.15 a share, which was a 4.8 per cent discount to the last close.
Telstra will now become Centuria's largest tenant, representing 13 per cent of its industrial portfolio’s income with the deal expected to be completed by the end of August.
Initial annual rent payments are understood to be worth $17.5 million to Centuria and be subject to CPI reviews.
The Telstra capture will now push Centuria Industrial REIT's assets under management to 53, worth a collective $2.05 billion, increasing by 70 per cent on the same time last year. The acquisition also lifts the portfolio's WALE to 10.2 years.
Centuria Industrial REIT fund manager Jesse Curtis said the acquisition of Telstra's sought-after assets would continue the significant growth achieved across 2020.
“The Clayton acquisition also enables CIP to expand into the industrial sub-class of data warehouses, which is a growing area particularly in light of increased demand resulting from Covid-19’s impact and reliance on digital infrastructure,” Curtis said.
“The transaction increases CIP’s weighting on Australia’s eastern seaboard with 63 per cent of assets based across Victoria and New South Wales.”
Centuria also noted it had entered into an agreement to acquire a 8,710sq m distribution centre in Smeaton Grange in NSW for $16.4 million.
The asset, located in Sydney’s south west, holds a 9.7 year WALE and is fully let to Easy Signs.
The fund manager has also picked up a $14 million industrial facility in Tullamarine, fully let to Hellman Worldwide.
Centuria head of funds management Ross Lees said since taking management of the REIT in 2017 the fund had kicked on, managing to secure well-positioned assets in in-fill locations and attract high-quality tenants,” Lees said.
“More recently, we have sought fit-for-purpose properties that are infrastructure like to the occupiers, which attract long WALE and subsequently resilient income streams.
“The Telstra Data Centre, along with the assets in Smeaton Grange and Tullamarine, fit this strategy well.”