ESR Investments have added a further 11.6 ha of land to its Westlink Estate following the settlement on a deal with Silk Contract Logistics Holdings (SLH) for $58m.
Silk Contract Logistics provides specialist Port-to-Door land side logistics and supply chain services in all major Australian capital cities with existing facilities in Eastern Creek, Erskine Park and Yennora. Late last year, SLH entered into a contracts to acquire a site at 1030 Mamre Rd for $58m with the intention of transferring the contract to a development party to deliver a new logistics facility on their behalf.
The site borders on ESR’s Westlink Logistics Park and as such ESR were the front runner for the deal.
SLH confirmed the appointment of ESR in April 2022. As part of the transaction, SLH has entered into an agreement with ESR under which it may enter into a 10-year lease for purpose-built warehouses on the site with ESR responsible for the construction and associated build costs of the warehouses.
In return, SLH will receive an up-front cash amount of $13.55 million which includes a reimbursement of the $5.8 million deposit, stamp duty of $3.2 million and other costs incurred. Additionally, SLH is entitled to receive up to $28.8 million as lease incentives subject to a number of conditions.
The long-term lease is due to commence following practical completion, which is scheduled for 2H 2024.
According to market reports, the rent under the lease agreement is similar to what SLH is paying across its current NSW sites. With the lease expiry of these existing site leases closely matched to the expected commencement of the new lease, SLH have the flexibility to consolidate into a new premises or to retain its existing sites and seek to fill the Kemps Creek warehouse with new business.
The land acquisition price equates to $500/sqm of land area and compares to ESR’s earlier land deals at Abbots Rd at $227/sqm – $391/sqm. ESR have now settled on 85ha of land since March 2022.
It is a smart move for SLH who have used their market position to leverage a long term lease deal and pocket circa $10m of profit in the process.
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