Charter Hall acquires SA Emergency Control Centre for $80m

Charter Hall’s Social Infrastructure REIT has acquired the new purpose-built South Australian Emergency Services Command Centre currently under construction in an $80m deal announced today.

The REIT will purchase the land and works completed to date for $23.0 million and fund the remainder of the development on a progressive basis for a total consideration of $80 million.

The facility will be leased (85%) to the South Australian Government and occupied by four Government emergency services agencies on a 15-year lease, with fixed 2.5% annual rent escalations and two 5-year options.

The property is located at 33 Richmond Road, Keswick, South Australia and is a 1.6 ha site, approximately 2 kilometres from the Adelaide CBD and is a core inner urban Adelaide location, adjoining a major rail and transport hub with strong retail amenity and associated infrastructure.

The new earthquake-resilient centre will feature backup power, water and wastewater storage and technology redundancies. The facility is essential to post-disaster recovery and has been designated as importance level 4 under the National Construction Code.

The development will comprise a free-standing office building with a net lettable area of 5,532 sqm, along with a freestanding warehouse of 1,000 sqm and adjacent hardstand of 1,468 sqm. The development will also include a six-level multi-deck car parking station servicing the asset and surrounding business park.

CQE will receive a coupon of 5% during the development phase with completion expected in October 2021. The purchase price reflects a passing yield of 4.8%. The transaction was negotiated off-market with the developer, Axiom Properties who acquired the site in 2009.

Axiom has retained the development rights over the surplus land, equating to approximately 1,200 sqm and capable of accommodating another facility of approximately 4,500 sqm of net lettable area for a future ancillary use.

Axiom Managing Director Ben Laurance commented “We were extremely proud to be selected by the South Australian Government to develop this critical infrastructure asset for the State, and we are particularly pleased to be working again with Charter Hall to deliver this project and long term Government commitment for their Social Infrastructure Fund”.

CQE Fund Manager, Travis Butcher commented “This asset is a great addition to CQE, purpose-built for the South Australian Government Emergency Services agencies, adding an additional Government tenant to CQE’s tenant composition, enhancing income sustainability and resilience with a continued focus on essential services underpinned by Government support. The adjacent hardstand also has future development potential and the opportunity for other Government related services to co-locate. The absence of stamp duty in South Australia also improves the net return to CQE unitholders.”

Mr David Harrison, Charter Hall Group Managing Director and CEO commented “This transaction was negotiated off-market as a result of Charter Hall’s relationship with the vendor. Adelaide is a market Charter Hall knows well with a long history of developing in the city, most recently having completed the $251 million development of the GPO Exchange. We continue to see good opportunities to partner with Government and enterprise in South Australia, continuing our long involvement in the state.”

Following the completion of this development and the Mater acquisition, CQE’s income from social infrastructure properties outside of childcare will increase to 15% of portfolio income on a pro-forma basis and CQE will have remaining liquidity of $80 million.