Quadrant Investments Makes Value-Add Industrial Play

Perth-based property funds manager Quadrant Investments has acquired its tenth asset since launching, after concluding the capital raise fully subscribed in October for its QI Value Add Income Trust No 2. The newly established Trust, which is the second in Quadrant Investments’ β€œvalue-add” series, is a single-asset Trust that has acquired two adjoining industrial properties totalling 1.84 hectares in land.

The combined acquisition of 4-12 Hoskins Road, Landsdale, Western Australia features an underdeveloped site with a total building area of 5,855 square metres, reflecting a site coverage ratio of just 32%. The properties are both leased to a long-term tenant, a wholly owned subsidiary of ASX200 listed Seven Group Holdings, who has occupied the site for nearly 20 years.

Aiding in its desirability, the site configuration offers various redevelopment or repositioning opportunities, with the underlying land split over two titles and combining for three street frontages. The extensive road exposure of over 400 metres provides multiple access points and both drive through and around access.

Quadrant Investments Managing Director, Phil Fogliani, said, “The acquisition of 4-12 Hoskins Road provides a unique value-add proposition for our investors, capitalising on the strength of the industrial market.”

β€œOur β€œValue Add Income” series actively seeks to deliver strong capital growth via repositioning or additional development, with an aim to providing regular and stable income distributions for investors post repositioning. These adjoining assets certainly fit that profile, with the land’s unique characteristics providing multiple options for repositioning or partial future redevelopment,” added Mr Fogliani.

The QI Value Add Income Trust No 2 is aiming to deliver its investors with total returns (internal rate of return or IRR) of in excess of 11% per annum, with normalised income distribution targets of 7.0% plus per annum, paid on a monthly basis.

The industrial sector has been a standout performer nationally, and the Perth market has seen strong results across all regions, with demand and absorption leading to strong rent growth. The strategic decision for Perth’s premium northern corridor industrial locality was relatively clear, according to Mr Fogliani.

β€œWhile we anticipate that record low yields will adjust in the current interest rate rise cycle, we believe the continuing strength of demand and space absorption will maintain strong growth prospects in the sector. This view is further bolstered by the current low vacancy levels, with major real estate agency research teams quoting vacancy rates of well under 1.0% for established stock in the northern precinct for warehouses over 3,000sqm,” commented Mr Fogliani.

Mr Fogliani added that the market outlook, together with the asset’s characteristics, provided the Trust with the flexibility of adding value in the short term by repositioning via renegotiating the lease over the existing property, with the option of driving further value-add avenues by constructing a new 4,500 square metre warehouse over a portion of the site in the medium to longer term.

The latest successful acquisition adds to Quadrant Investments’ growing portfolio of assets under management, which has grown to over $90 million, a figure that has doubled since one of Australia’s oldest companies, the 109-year-old Richard Noble & Company, purchased a 50% interest in the business.

While some market participants are battening down the hatches in the current market, Mr Fogliani noted that Quadrant Investments’ discipline in acquisition strategy over the last 12-18 months means that they are very much still active in the market for new acquisitions and are currently closely reviewing opportunities in Perth, Adelaide and South-East Queensland.

The sale was negotiated by Spiro Agapitos, Director of Vita Property Group, via an on-market Expression of Interest campaign.

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