Investec Australia Property Fund have recently acquired a $22 million industrial property in Hallam, Melbourne with an initial yield of 6.3%.
Located at Siddons Way, Hallam, 33 kilometres south east of the Melbourne CBD, the property comprises two separate buildings with a gross lettable area of 15,504 square metres split across warehouse and distribution facilities and associated office accommodation, 80 parking bays and a site area of 32,701 square metres.
Considered one of the city’s most established industrial precincts, the property has access to major arterials and freeways including the South Gippsland Highway, Eastlink and the Monash Freeway.
IAPF CEO Graeme Katz said the transaction took Investec's total portfolio value to $801 million.
“The acquisition aligns well to the Fund’s strategy of investing in well-located, high quality assets that provide a sustainable income stream for investors,” Katz said.
“The property is located in one of Melbourne’s most tightly held industrial precincts which is home to other significant companies such as Ceva Logistics, Australia Post and TNT."The property is 100% occupied by national retailer Focus on Furniture, who uses the property as their national office and main distribution warehouse. Focus on Furniture is an Australian-owned company dedicated to selling premium quality furniture sourced both locally and from around the world.
The company has been operating for 15 years and specialises in lounges, dining and bedroom suites. It currently has 33 stores in Victoria, NSW, ACT, South Australia and Queensland and employs more than 150 people. The lease is long dated, expiring in 7.8 years and includes contracted annual rental escalations of 3.0%.
"In addition, Amazon has just announced it will locate its first Australian distribution facility in the adjoining suburb of Dandenong South," Katz said.
"The property is currently occupied by a tenant with a strong track record under a long-term lease with 7.8 years to run, but the property has flexible future uses and could potentially be split into two separate units to accommodate multiple users. It is also split over two titles which could be sold separately.
"Additionally, there is expansion land available that could accommodate additional hardstand and loading capacity and increase the income generated from the property.”
The acquisition will reportedly be funded by utilising Investec's existing debt facility. Post the acquisition Investec will be geared to 35% with a weighted average cost of debt of 3.67% and hedged to 87% for an average of 7.2 years.
Settlement of the property is due to occur in mid-October 2017.