This article is from the Australian Property Journal archive
OVER 2022 so far, Australian property fund manager Trilogy Funds has continued to place its trust in regional industrial assets.
The fund manager has added several new assets to its Industrial Property Trust over the year, taking advantage of relatively higher capitalisation rates, strong tenant covenants and low vacancy rates.
“The focus for the Trilogy Industrial Property Trust has been buying assets with good lease covenants with solid tenants in areas suited to logistics, warehousing, manufacturing, and mining. As a result, we have concentrated on regional areas, which are delivering significantly better returns for investors,” said Philip Ryan, co-founder and managing director at Trilogy Funds.
These land-rich regional assets in South East Queensland and NSW offer the potential for strong returns capital appreciation and value add projects for Trilogy Funds.
“The trust maintains balanced exposure to both capital cities and regional cities, but we’ve been wary of paying too much for assets. The big issue is people overpaying for assets and we are seeing capitalisation rates softening, particularly in capital cities,” added Ryan.
“However, the industrial market is somewhat protected by strong supply-demand metrics, and the Industrial Trust’s portfolio is expected to continue to benefit from increasing valuation increases as its assets are progressively revalued.”
In April, the trust snapped up a prominent and strategic 4.91-hectare industrial site in in Toowoomba’s industrial precinct of Torrington for $10.75 million.
While in June, Trilogy Funds acquired a warehouse and office facility on a 2.61-hectare site at Corbould Park in the Sunshine Coast Industrial for $20.6 million, which set a 2022 transaction record for the industrial sector at the time.
And in September, the bought up a multi-warehouse facility on a 1.48-hectare site in Tomago, 20 kilometres northwest of the Newcastle CBD, for $16.14 million.
“The industrial property market largely strengthened during COVID-19, as increased e-commerce penetration created additional demand for warehouse space,” noted Ryan.
“Tenants were not asking for rent relief as was the case with retail property and industrial property doesn’t have the same degree of incentives being paid like commercial office property. We’ve also seen rent increases in line with inflation or a minimum amount.”
Ryan added that the trust is currently actively engaging with its industrial tenants to identify potential opportunities to add value to their properties.
He noted that catering to specific tenant requirements enables the trust to not only support these tenants’ growth but also retain a high WALE and occupancy.
“At our Carrum Downs property for example, we recently completed construction of a 550-square metre extension to the existing warehouse to support the tenant, Tempur Australia, with product expansion. This has contributed significantly to uplift in value of the property and resulted in the tenant extending their lease,” said Ryan.
“Expansion potential was also an attractive factor for the recently acquired industrial asset at Corbould Park, where the asset is land rich, with approximately 19% site coverage, presenting ample opportunity to increase the building’s floor area in the future.”
Trilogy Funds is continuing to seek further industrial acquisition opportunities, with the asset class supported by strong demand and tight supply.
“While the right properties can be hard to find, we are continuing to actively look for quality investment properties that have tenants of good covenant with the option to value-add through expansion works if possible,” concluded Ryan.
