Brickworks have launched a new Joint Venture manufacturing property trust with Goodman Group to be called today the Brickworks Manufacturing Trust. The trust will initially house a portfolio of 15 manufacturing plants, tenanted by the Company’s Australian Building Products businesses.
Brickworks will retain 50.1% ownership of the new trust, with the remaining 49.9% interest sold to Goodman. The 15 operating sites initially housed in the trust in total comprise 496 hectares in land area and have a gross asset value of $416 million (100% interest).
Each of the sites will be tenanted by Brickworks’ operating businesses, such as Austral Bricks, Bristile Roofing, Austral Masonry and Austral Precast, with long duration leases of 5-20 years, which have options to extend. The weighted average lease expiry (WALE) will initially be 16 years.
Brickworks Manufacturing Trust – Overview
|Ownership:||Brickworks 50.1%, Goodman 49.9%|
|Properties:||15 manufacturing sites, predominantly zoned industrial|
|Location (by asset value):||Queensland 38%, Victoria 36%, Western Australia 14%, New South Wales 6%, South Australia 5%, Tasmania 1%|
|Portfolio Valuation:||Gross asset value $416 million|
|Debt and Gearing:||No debt|
|Tenants:||All tenants are 100% owned Brickworks subsidiaries, including Austral Bricks, Bristile Roofing, Austral Masonry and Austral Precast|
|Net rent:||Initial net rent $17.75 million, with annual increases of 2.5% for most properties|
|Weighted average lease expiry (WALE):||16 years (weighted by income)|
The gross value of the Brickworks Manufacturing Trust assets of $416 million represents a premium of $280 million to the current book value of those assets (after allowing for various transaction-related costs and provisions).
The sale of the properties will deliver gross cash proceeds to Brickworks of $207 million, representing 49.9% of the asset value. After allowing for tax, duty and transaction costs, net proceeds of around $193 million are anticipated, with these proceeds to be used to pay down Group debt.
Brickworks Managing Director Mr. Lindsay Partridge said: “The partial sale and lease back of these properties will deliver significant cash proceeds, allowing Brickworks to realise value for shareholders and capitalise on the strong growth in industrial land values over the past few years.”
“Importantly, the lease terms have been structured to ensure minimal impact to the operational flexibility of our Building Products businesses, which will continue to operate on these sites.”
“The creation of this new property trust to house our manufacturing plants is the next step in our property strategy. Goodman are the undisputed market leaders in industrial property and have been instrumental in driving the growth of our existing Industrial JV Trust. Together, we plan to actively manage the new Brickworks Manufacturing Trust, in which there are several properties that have the potential for additional development and greater utilisation.”
Along with its interest in the Industrial JV Trust and the Brickworks Manufacturing Trust, Brickworks retains around 5,300 hectares of 100%-owned operational and development land across Australia and North America.
Mr. Partridge said: “Among our wholly-owned properties, we have four significant land holdings that may be suitable for sale into our property trust structures over the coming years. Based on independent market valuations, these sites have a combined current “as is” value of $0.8 billion and a “rezoned” value of $1.3 billion.”
“These development sites include a 75-hectare parcel of land at Oakdale East in New South Wales, and 332 hectares of surplus land at Craigieburn, in Victoria. Both sites are earmarked for sale into the Industrial JV Trust in the coming years, subject to approvals.”
“We also hold an 83-hectare property at Horsley Park in Sydney, where we are currently building a new brick plant. This property also comprises another well-established brick plant, a quarry and additional surplus land. Subject to rezoning, this site may be suitable for future sale into the Brickworks Manufacturing Trust.”
“In North America, land surrounding our brick plant at Mid-Atlantic in Pennsylvania has rezoning and development potential. With the site well suited to industrial development, we are currently exploring options for this site with Goodman.”