APN Convenience REIT acquires 2 new Centres

The APN Convenience Retail REIT has exchanged contracts to acquire Warrego Highway Travel Centre, QLD and conditionally exchanged contracts to acquire Dubbo Service Centre, NSW for a combined $24m.

Warrego and Dubbo are well designed convenience retail centres strategically located on main arterial roads with exposure to high traffic flows.

Warrego is a purpose-built travel centre constructed in 2019 and is 100% occupied with 85% of the income securely leased to major tenants Ampol (63% of net income) and Carl’s Jr (21%). The remainder of the rent is derived from two experienced, local convenience retailers. The property’s weighted average lease expiry is 11.5 years, and the average rental growth is 2.9% per annum.

Settlement is expected to occur by October 2021.

Dubbo is being acquired via a fund through structure and will comprise a Mobil service station and a Carl’s Jr restaurant with drive through. Construction has recently commenced and is due to complete by March 2022. The sale contract is conditional upon both tenants novating the existing agreement for leases over to the Fund, which is in the process of occurring.

The properties were acquired for a combined price of $24.4 million, representing an average purchase yield of 5.5%. A summary of the acquisitions is provided below:

PropertyMajor tenantsValuePurchase yieldWALE (yrs)WARR
Warrego, QLDAmpol, Carl’s Jr$16.0m5.3%11.52.9%
Dubbo, NSWMobil, Carl’s Jr$8.4m6.0%12.02.0%
Total $24.4m5.5%11.72.5%

AQR Fund Manager, Chris Brockett said: “The acquisition of Warrego and Dubbo reflect our active and disciplined approach to growing the portfolio, with the long WALE and average rent reviews providing a high level of income security and sustainable source of income growth.”

“We have a healthy pipeline of identified opportunities and look forward to further leveraging Dexus’s platform to continue to deliver on our strategy of investing in strategically located convenience retail assets that provide investors with an attractive, defensive and growing income stream.”

“These acquisitions build on the momentum of the 7-Eleven Kingston and United Gordonvale acquisitions announced in August, taking AQR’s total acquisitions for FY22 to $53 million.”

Following the settlement of Warrego and the completion of Dubbo, AQR’s portfolio will grow to 111 properties valued at $762 million, reflecting a weighted average capitalisation rate of 5.9% and a portfolio WALE of 11.8 years.

The acquisitions will be funded by existing debt capacity, increasing the Fund’s gearing to 33.6% on a pro forma basis, which is within the Fund’s 25% – 40% target range.

There is no change to the previously advised FY22 FFO and distribution guidance of 22.9 cents per security.

Premium Members can find all APN Convenience Retail REIT Articles, trading Analysis, Annual Reports and Presentations here

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About Warwick Petschack

Warwick has over 25 years of property investment and management experience. Principally responsible as Managing Director for Capital Management Australia and Joint Managing Director for Chauvel Capital Partners and Editor of Australian Property Markets News.

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