Centuria Capital have released further details on the Centuria Industrial Income Fund No.1, its first unlisted property fund focused on the industrial sector.
The Fund will invest in a portfolio of three industrial assets in Queensland and South Australia which were announced recently. The Fund has an initial term of six-years to March 2027.
The Fund’s Responsible Entity, Centuria Property Funds Limited, is seeking to raise $39.7M through the offer of 39.7M units at $1.00 per unit. Centuria are offering the investment to retail investors via the PDS.
Funds raised will be used, in conjunction with debt, to acquire the properties at 136 Zillmere Rd, Boondall QLD, 2-8 Titanium Court, Crestmead QLD and 68-70 Kapara Rd, Gillman SA.
The assets provide a diversified exposure to the industrial real estate sector, with income supported by the following metrics:
- the Properties are 100% occupied with a Weighted Average Lease Expiry (WALE) of 9.1 years (by income);
- the Properties are located in well established industrial precincts; and
- the leases are underpinned by strong tenant covenants – the QLD properties have long-standing tenants with lease expiries of 10-years, and the SA property is adjacent and connected to the tenant’s key container logistics operations in the Port Adelaide precinct. Rental income from the two QLD properties is above market rents but this has been factored in the independent valuations.
The properties are being acquired on a weighted portfolio capitalisation rate of 5.97% (range 5.75% – 6.75%) with the acquisition price being reflective of the long WALE and strong tenancy profile.
The Fund has terms for an initial three-year debt facility with Westpac at a fixed interest rate of 2.10% p.a. The initial Loan to Valuation Ratio (LVR) of 46.3% provides a buffer to the LVR bank covenant of 60.0% and the initial Interest Coverage Ratio (ICR) of 4.75x is well above the bank ICR covenant of 2.0x.
The Fund will have an initial NTA of $0.87 per unit after deducting the upfront costs, most of which relates to stamp duty and acquisition costs.
The Manager is forecasting a 6.0% (annualised) distribution yield in FY21, increasing to 6.25% in FY22.
Fund Overview:
| Responsible Entity | Centuria Property Funds Limited |
| Fund Manager | Centuria |
| Fund Size Target | $39.7M |
| Fund Open | 1st February 2021 |
| Fund Raising Close | TBC |
| Fund Term | 6 years to March 2027 |
| Target Return | 6% distribution yield in 2021 |
| Liquidity | None |
| Investor Type | Retail Min $50,000 |
| Target Assets | 136 Zillmere Road, Boondall QLD 2-8 Titanium Court, Crestmead QLD 68-70 Kapara Road, Gillman SA |
Fund Structure:
The assets are held in sub trusts, the trustees of which are wholly owner by the Responsible Entity.
Related Parties:
136 Zillmere Road, Boondall QLD is being acquired from a Centuria’s list Industrial REIT (CIP) in an off-market transaction with the acquisition price supported by an independent valuation. Centuria is also providing a loan to fund the deposit for all three properties and to secure a hedge on the debt, with total interest estimated at $0.1M.
Fees charged
Centuria will charge a an acquisition and placement fee of 2.0% of the gross value of the properties, a management fee of 0.8% of the gross value, costs and expenses equal to 0.23% of the gross value, a sales / disposal fee of 1% and a performance fee of 20% over an 8% hurdle.
Core Property Research has conducted a review of the fund. See attached.
Core Property estimates the Fund to deliver an Internal Rate of Return (IRR) of between 5.7% – 9.8% p.a. (midpoint 7.7% p.a.)
Core Property Research have provided the Fund a “Recommend” rating.
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