360 Capital Group

16 April 2017

The 360 Capital Group (TGP) undertook an equity raising of $40m this week for its Total Return Fund (TOT). TOT will in turn use this capital to support a $74M equity commitment to a new private equity real estate fund which it hopes will be sufficient to seek a further $300M of capital commitments to provide a fund with $370M of fire power. See http://www.asx.com.au/asxpdf/20170412/pdf/43hgx9b2cqw0n5.pdf TOT’s commitment to the new fund includes its 14% ownership in Industria REIT which along with TGP’s other IDR holdings gives it 17% control of IDR. TOT may make a bid to take control of Industria REIT (IDR) but it will need to fight off APN Group who is the manager of the Industria REIT and who controls 19.3% of the listed trust. IDR has some $550M of industrial & business park assets, held at an average cap rate of 7.5% and a weighted average lease expiry of 7.8yrs. The trust has gearing of 35% with net assets sitting at $339M (as at 31st Dec) with a NTA of 2.08 per security. The stock was trading last week at $2.20. Recent property transactions suggest that IDR may be undervalued. Over the past 18 months, Blackstone and LOGOs property have acquired over $2.0B of purely industrial assets on an average cap rate of 7.0%. Not all of IDR’s assets would have the potential to move 50bps sharper however if the IDR showed a 50bps sharper cap rate across its portfolio, the current NTA would be $2.35. http://www.industriareit.com.au/