This article is from the Australian Property Journal archive
CADENCE Property Group has expanded its investment portfolio under a value-add fund and newly established trust with the $48.25 million acquisition of a steel manufacturing facility in Melbourne’s north.
This acquisition of the 121,700 sqm Somerton facility at 125-175 Patullos Lane marks the second investment made by the Cadence Australian Real Estate Partnership I (CAREP I), Cadence’s flagship multi-asset value-add fund, which will hold a 50% interest in the asset. The remaining 50% will be held in the Cadence Direct Industrial Trust No. 4 (CDIT No. 4), which was established to invest into the asset.
Steel Mains, Australia’s largest manufacturer and supplier of water pipeline systems, has occupied the property on a long-term basis and has over six years remaining on its lease. The property has a low site coverage of 27%.
Cadence said it has consistently aligned similar purchases with the business’ objective of identifying well-priced assets that provide both strong downside protection and viable upside scenarios – reflected in CAREP I’s first purchase at 525 Geelong Road in Brooklyn, in Melbourne’s west, after it secured over $55 million of capital in May this year.
“We are excited about the acquisition at Patullos Lane and the prospects it holds for our investors,” said Cadence head of investment management, Tony Mount.
“There is potential to increase income during a long-standing tenant’s occupancy while benefiting more broadly from its under-developed nature and the ongoing improvement of the surrounding area.”
The acquisition builds on Cadence’s existing presence in Melbourne’s north, including a significant landholding within Craigieburn’s North Employment Area Precinct Structure Plan. In the middle of the year, Cadence and private vendor Linkage Property offloaded a 33-hectare site in the precinct for $87 million to Frasers Property Industrial.
“We have been very active in Melbourne’s north over the last few years and continue to have a high level of conviction in its future growth potential,” said Cadence CEO, Charlie Buxton.
“Beyond the appeal of the location, the asset ticked a number of boxes we specifically look for through our value-add strategy including buying well below replacement cost and the ability to generate reliable income returns.”
The industrial sector – running hot since the beginning of COVID – succumbed to the market malaise in the September quarter, according to MSCI Real Assets, with deal-making slowing down. However, due to a dearth of activity elsewhere, the Melbourne industrial market, with $2.499 billion transacted, was the third most active market segments in 2023 year-to-date. Recently, ASX-listed property heavyweight Dexus offloaded more than three hectares of premium industrial land in Melbourne’s west to two owner-occupiers for $25.3 million.
In May, Cadence and GPT completed their fully-leased $150 million industrial estate, Keylink Estate, in Melbourne’s south east suburb of Keysborough.
