Irongate invest $156m in Office and Industrial assets

Irongate Group has acquired a 50% interest in 510 Church Street, Cremorne for $130M and 100% of an of an industrial business park located at 16 Aspiration Circuit, Bibra Lake WA (Bibra Lake Property) for a purchase price of A$26 million.

The Cremorne Property is a brand new A-grade office building comprising 19,798m² of lettable area across 9 levels of office accommodation, ground floor retail and 145 car parks which will achieve a 5.0 Star NABERS Energy Rating, 5 Star Green Star Design Rating and provides excellent tenant amenity with first class end of trip facilities, state of the art digital capabilities and exclusive rooftop terrace with bar.

The building is located in Melbourne’s premier fringe office market, 2kms south-east of the Melbourne CBD, and enjoys excellent connectivity to the East Richmond train station and the Citylink Freeway.

Commenting on the acquisition of the Cremorne Property, CEO of IAP Graeme Katz said, “The Cremorne Property provides us with an opportunity to improve the overall quality of the portfolio in a market we are familiar with. The property was developed by Alfasi Group who will maintain a 50% interest in the property alongside IAP. Alfasi Group has been in business for more than 40 years and specialises in construction, equipment hire and property development across Australia, Hong Kong, Macau, China, South Korea, Thailand and Vietnam having been involved in projects such as Marina Bay Sands in Singapore, Bangkok International Airport and the West Kowloon Terminus.”

The Cremorne Property has a current occupancy of 76% with a 7.5 year WALE and is anchored by multinational Tokyo-listed marketing agency Dentsu Inc., Monash IVF and the Commonwealth Government’s National Disability Insurance Scheme, who together account for 59% of income.

The vacant space is subject to a 12-month gross rent guarantee provided by the vendor, the majority of which becomes non-refundable if tenants have not been secured and rent payments have not commenced by 1 March 2022. There is strong interest from high quality tenants to lease the vacant space, particularly given the quality of the Cremorne Property and its desirable location.

The Bibra Lake Property comprises 16,861m2 of lettable area across 8 warehouses with 296 car bays and its location 16kms south of the Perth CBD provides excellent connectivity to several of Perth’s key transport hubs including Fremantle Port, Kewdale Freight Terminal and Perth Airport.

The property is also within 4kms of Roe Highway and Kwinana Freeway, two of Perth’s key carriageways that will benefit from the WA state government’s A$11.7 billion road upgrade package over the next four years.

The Bibra Lake Property is newly-built in 2015 and provides excellent industrial accommodation ranging from circa 1,500m2 to 2,100m2 catering for a variety of uses. It is 100% leased with a 3.5 year WALE, with the tenants comprising prominent local businesses and larger national operators. Many tenants have undertaken significant fit outs to suit their specific operations.

Commenting on the acquisition of the Bibra Lake Property, Katz said, “We have been able to secure the property off-market at an acquisition yield of 5.8%, which provides an attractive spread to the eastern seaboard states, where industrial assets are currently commanding yields of 4.00% – 4.75%. Recent transactions indicate that this spread will compress as investors shift their focus to the higher yields on offer in the Western Australian industrial market. Vacancy in Perth’s southern industrial precincts continued to fall in H1 2021, sitting at 5.4%, largely because of tenants seeking quality accommodation in good locations.

With land supply in Perth’s key industrial precincts heavily constrained and the supply pipeline at all-time lows, we believe the Perth industrial market is set for continued vacancy compression and rental growth.”

Irongate will fund the acquisitions via a fully underwritten institutional placement to raise approximately A$50 million at an issue price of A$1.55 per stapled security.

The acquisitions are expected to be accretive to FY22 DPS and FFO per security, with FFO expected to grow 6.0% to 7.0%, and FY22 DPS expected to grow 2.5% to 3.0%, reflecting the top end of previously communicated guidance.

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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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