This article is from the Australian Property Journal archive
PAN-Asian logistics giant ESR has picked up a $61.6 million portfolio of industrial and logistics facilities in Brisbane from Queensland-headquartered Direct Commercial Property (DCP), which raced to offload the assets after identifying a peak in the Australian market late last year.
Three of the five properties are based in Hemmant, with the other two in Wacol and Eagle Farm, all strategic industrial TradeCoast and western corridor precincts.
DCP managing director Ed Bull said the properties were originally purchased as single asset trusts over several years, with the view to add value by active management and re-positioning.
“These five properties were purchased with a view to hold for five to seven years, depending on market conditions. However, we identified that the Australian industrial market had hit a peak in late 2021, and moved early this year to seek a portfolio buyer,” he said.
“The deal was struck in March this year and was unconditional in June, before the significant interest rises began.
“We have seen the industrial investment market slow significantly since completion of this deal, and expect the pricing metrics to reset over the coming 12 to 18 months.”
Two of the properties were purchased by DCP little more than a year ago. They included the multi-tenanted 28 Akuna Court in Hemmant and associated wet leases for $19.75 million, which have now sold for $25.7 million and on a yield of 5.53%, and 58 Anton Road in the same suburb, leased to Cruise Craft Boats, for $6,195,000, which has now sold for $7.17 million, at 4.4%.
Also selling in Hemmant to ESR were 26 to 30 Wyuna Court, home to Austral Masonry, for $11.97 million at 5.94%. In Wacol, 739 Progress Road sold for $7.2 million with a lease to Allnex Resins representing an initial yield of 5.57%, while 112 Harvey Street in Eagle Farm, occupied by Victaulic Australia sold for $9,595,000 on an initial yield of 4.93%.
DCP investors across the five assets would benefit from an average internal rate of return (IRR) of 20% for extremely low-risk investments, Bull said.
DCP has an additional three regional assets currently under contract to be sold. Bull said that following these sales, DCP will hold five assets that have additional upside and strategic value, in addition to private equity investments in Rino Recycling in Brisbane and in Toowoomba-based Mort & Co.
CBRE’s Jack Pershouse, who negotiated the deals, said the transaction represented the strong demand for value-add, industrial-grade product in Brisbane’s core logistics markets.
“The assets incorporated within the portfolio offer stabilised income, paired with low site cover fundamentals, allowing access for future development within a one to five year window,” he said.
According to MSCI research, $1.286 billion worth of Brisbane industrial assets traded in the first half of 2022, 38% less than the same period last year.
ESR’s acquisition follows its July purchase of a $106.5 million portfolio of five properties spread across Melbourne for its ESR Australia Logistics Platform II.
The portfolio was acquired on a weighted average capitalisation rate of 4.46% and weighted average lease expiry of 5.7 years.
The properties include adjoining sites in Port Melbourne, bought for $28.1 million, properties in the south eastern suburbs of Keysborough (for $25 million) and Dandenong South ($15 million), in the eastern suburb of Kilsyth (22.2 million), and the western industrial hub of Truganina ($16.2 million).
