This article is from the Australian Property Journal archive
SINGAPORE’S The Straits Trading Company has snapped up five logistics assets in Adelaide and Melbourne for $130.5 million in a joint venture with Commercial & General, keen to tap into the growing e-commerce industry.
The JV’s core business will be in the development, ownership, and management of logistics properties and ancilliary business space. Straits Real Estate is the real estate investment arm of The Straits Trading Company and the John Lim Family Office, the investment holding group of companies founded by John Lim, group CEO of ARA Asset Management Limited.
Straits Real Estate CEO Desmond Tang said this marks the group’s first investment into Australia’s logistics market, underscoring its commitment to grow its business down under.
He said a positive sector outlook and attractive risk adjusted returns are two key reasons behind the group’s rapid entry into the Australian industrial property sector.
“The sector is supported by strong economic fundamentals driven by population growth, GDP growth, a growing e-commerce industry, and infrastructure spending. Around AUD70 billion has been allocated for transport infrastructure from2014 to 2021, with plans by the Australian Government to spend AUD75 billion for funding road and rail infrastructure from 2018 to 2027.
“With this venture, we are attracted to the strong and immediate cashflow, backed by good-credit tenants such as Coca-Cola Amatil and Incitec Pivot. It obviously helps that Australia is a vibrant and large market, offering tremendous potential for growth. We are constantly seeking out opportunities that will add depth and breadth to SRE’s business, and this certainly fits the bill.
“We have a strong partner in Commercial & General and we plan to tap on our joint venture to ramp up our Australia strategy. With the team’s experience and familiarity with the market, we believe we have an excellent platform to tap into more opportunities in the Australian logistics sector.” Tang added.
The portfolio includes one asset in Melbourne, a mixed-used 30,000 sqm office and warehouse facility in Bayswater.
The other four assets are located in Adelaide, a 46,000 sqm distribution centre in Salisbury; a 152,000 sqm land parcel in Salisbury; a 17,000 sqm Port Adelaide facility and 50,000 sqm centre (to be built) in Kilkenny.
Collectively, the group now owns five logistics assets in Australia amounting to an aggregate NLA of more than 93,000 sqm, as well as total development land area of 20.2 hectares earmarked for logistics uses with permissible NLA of more than 90,000 sqm. The initial WALE of the portfolio exceeds 9 years.
In addition to its logistics property portfolio, the group also has two prime commercial assets in Sydney and Perth.
The JV will be headed by Mark Brammy, an executive director of Commercial & General.
Commercial & General CEO Trevor Cooke said partnership with Straits Real Estate was another important milestone in the company’s continued growth.
“We have put a lot of work into establishing a deep pipeline of development opportunities across the Australian logistics space and we are proud to have the opportunity to deliver that with an organisation the calibre of Straits Real Estate,” he added.
Meanwhile Brammy said the target markets include South Australia, Victoria and Queensland given the underlining prime yields and fundamental economic drivers of this sector in these markets.
“Existing tenant relationships within the seed asset portfolio also provide enhanced exposure into these target markets nationally,” Brammy said.
JLL’s head of international capital Stuart McCann and South Australian managing director Jamie Guerra acted as the exclusive advisors.
“This is a great example of a high quality local industrial developer forming a strategic partnership with a large offshore capital partner by selling down major stakes in existing holdings, retaining development and management rights, and jointly funding major development pipelines going forward.
“Strong tenant demand in the logistics sector across Australia, underpinned by strong e-commerce macro-economic drivers, is driving a substantial uptick in design and construct development activity and generating large development pipeline opportunities for both developers and investors. Tenant net take-up reflected approximately 2.5 million sqm last year across Australia, which is 22% higher than the 10-year average.” McCann said.
“The industrial occupier demand improved over 2017 with the strongest annual gross take-up recorded since 2013. This was driven by major defense project commitments by the Australian government, a growing wine and agriculture export market, together with advanced manufacturing and transportation logistics.” Guerra said.
Australian Property Journal
