Moelis Launches Prime Logistics Fund for Wholesale Investors3 March 2021
Moelis has launched a wholesale property fund to initially invest in two South Australian Logistics assets with an equity requirement of $50m.
The Fund will either invest directly in a property or indirectly via the MA Logistics Fund (MALF) which is structured to include offshore investors seeking to invest via the Significant Investor Visa (SIV) program. The Fund will owns a majority 60.1% interest in MALF.
MALF has acquired 16-26 Caribou Drive, Direk SA which is leased to Scott’s Refrigerated Logistics with a long WALE of 14.9 years. In addition, the Fund has acquired a 100% direct interest in 67-73 & 75 Kaurna Ave, Edinbugh SA, which is expected to be completed in August 2021 and leased to M3 Logistics on a new 7-year lease. Both assets are being acquired on an initial passing yield of circa 5.8%.
The Fund will be an open-ended fund but with rolling 5 year terms.
Moelis are forecasting a 6.0% (annualised) distribution yield in 2021 and an Internal Rate of Return (IRR) of between 6.0% and 8.8% p.a. over the initial 5 year term. The base case of 7.5% assumes a terminal cap rate of 5.39%, which is sharper than the initial yield.
The Fund will seek to manage its debt on a look-through basis with a target LVR of between 35% – 45%. Moelis has secured funding for this with NAB on a 3 year term with an average cost of debt of 2.0% pa.
The Fund has an initial five-year term and the Manager intends to provide a withdrawal in December 2025. In addition, the Fund intends to also offer a six-monthly withdrawal facility from December 2023 onwards, with a maximum limit of 5% p.a. of the Net Asset Value of the Fund. To manage liquidity, the Fund may also invest in cash (and cash equivalents) or by investing in A-REITs up to a combined maximum of 15% of the Fund, with no more than 10% in A-REITs.
Moeilis will charge investors the following fees;
- Acquisition Fee: 1.25% of the total consideration for an asset.
- Divestment Fee (Disposal Fee): 1.25% of the sale price for an asset.
- Management Fees: – Management Fees of 0.60% p.a. of the Gross Asset Value (GAV) of the Fund – Other costs and expenses are estimated at 0.15% p.a. of the Fund’s gross assets.
- Leasing Fees: Up to 50% of any external agent leasing fees payable in the event the Manager successfully executes a new lease agreement or extends an existing lease term.
- Project Development Fees: A maximum of 5.00% of the total development costs on any capital projects.
- Debt Arrangement Fees: 0.40% of the facility limit on any new Debt Facility, or alteration to an existing facility.
- Performance Fee: 20% of the Fund’s outperformance over an IRR of 8.0% p.a.
Core Property estimates the Manager is entitled to 6.2% of the total cash flow. Core Property considers the fees paid to the Manager to be at the low end of the range when compared to similar products, which are typically around 7% – 9%.
The Fund is estimated to have an initial NTA of $0.946 per unit based on the expensing of acquisition costs. . It should be noted the Fund benefits from lower acquisition costs as there is no stamp duty payable on the acquisition of the two properties in South Australia.
There is clearly a large amount of capital being deployed into the Industrial sector. The two assets being acquired have the benefit of long leases, however there is a redundancy to these assets which is often over looked.
The return profile appears to reflect the risks of the portfolio, however I caution against assuming the cap rate will sharpen. If the exit cap rate remains the same as the initial passing yield the 5 year IRR reduces to 5.2%.
Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.