CIP has entered into agreements to acquire three high quality assets valued at $447.1 million.
The transaction is anchored by the $416.7 million Telstra Data Centre, Clayton VIC, secured on a 30 year WALE with 100% occupancy on sale and leaseback terms.
The complex was put up for sale in May this year as part of the telco’s ongoing T22 transformation and simplification program.
“As part of T22, we have an ambition to monetise up to $2 billion worth of assets to strengthen our balance sheet. This deal means we have now reached over $1.5 billion,” Telstra CEO Andy Penn said.
The Clayton campus is spread over 3.2 hectares and incorporates 10 buildings, including Telstra's newest 6.1MW data centre and its adjacent 6.6MW data centre and associated energy centre.
The asset plays a core role in Telstra’s data centre strategy and provides significant capacity requirements as part of Telstra’s infrastructure network. The inclusion of the Telstra Data Centre provides CIP investors with exposure to a highly resilient and defensive subsector of industrial property being data warehousing and digital real estate.
The sector continues to be supported by strong industry thematics and increasing relevance in a digital world. Telstra will become CIP’s largest tenant by income and aligns with the tenant profile strategy of blue-chip occupiers. Telstra is an ASX20 company with an A-/A2 credit rating.
CIP has also entered into an agreement to acquire a $16.4 million, 8,710sqm modern industrial facility in Smeaton Grange, NSW and a $14.0 million modern, high-clearance distribution centre incorporating a two-level corporate office in Tullamarine, VIC.
Jesse Curtis, said, “CIP has begun FY21 in a strong position with the acquisition of three highly sought-after assets and continues the significant growth achieved in FY20. The transaction enables the portfolio to extend its WALE to 10.2 years, underpinned by 24% of income benefiting from triple net leases with minimal capital or maintenance expenditure leakage.”
“Telstra will become CIP’s largest tenant, representing 13% of the portfolio’s income. As an iconic ASX20 Australian company, Telstra is exemplary of CIP’s high-quality tenants. The data centre acquisition also enables CIP to expand into the industrial sub-sector of data centres, a continually growing sector particularly in light of increased demand that has resulted from COVID-19’s impact and reliance on digital infrastructure.”
The acquisitions will be partially funded by c.$340.8 million Entitlement Offer and $151.1 million of debt drawn from existing debt facilities.
Post-transaction, 24% of CIP’s portfolio will benefit from triple net leases, which removes any maintenance capex obligations and generates secure long term income for unitholders. Additionally, 31% of tenants will be ASX-listed companies.
To partially fund the acquisitions CIP is undertaking a fully underwritten equity raising via a 1 for 3.7 accelerated nonrenounceable pro rata entitlement offer to raise approximately $340.8 million at an issue price of $3.15 per unit. The issue price represents a:
- 4.8% discount to the last close price of $3.31 per unit on 4 August 2020
- 3.4% discount to the 5 day VWAP of $3.26 per unit on 4 August 2020
- 3.8% discount to TERP4 of $3.28 per unit
- 5.5% FY21 FFO yield and 5.4% FY21 distribution yield
Following the acquisitions and Entitlement Offer CIP’s pro forma gearing is expected to be 28.5%, maintaining balance sheet strength and providing flexibility to pursue future growth opportunities. CIP’s pro forma NTA per unit is expected to increase to $2.83 per unit.
CIP is also in exclusive due diligence on three highly complementary industrial assets valued at $45 million that are expected to exchange in 1HFY21. These additional assets are consistent with CIP’s strategy and are expected to deliver income and capital growth to investors.
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