Growthpoint Properties Australia (ASX:GOZ) announced that it has agreed to acquire a portfolio of three prime industrial property developments in Melbourne, Victoria, for a total consideration of AU$60.2 million (approximately ZAR542 million).
The acquisition represents an initial yield of 8.0%.
The properties are being developed by, and acquired from, ASX listed Australand Property Group. Expected completion is December 2013 for a 25,728sqm development in the Access Altona Industrial Estate and February 2014 for two developments in Key Industrial Park, Keysborough, of 12,800sqm and 17,834sqm.
The Keysborough property is leased to the Australian pharmaceutical company Symbion Pty Ltd on a 15-year lease. The developer has provided GOZ with a five-year rental guarantee over space in the remaining two developments not leased from practical completion.
Estienne de Klerk, Director of GOZ and its major security holder of 65%, South African listed property company Growthpoint Properties Limited (JSE:GRT), says: “These assets provide an excellent investment opportunity. They enhance GOZ’s property portfolio and further its strategic objectives of increasing its industrial assets, occupancy, average asset age and weighted average lease expiry (WALE). It also has annual fixed rent reviews for the properties averaging 3.5% per annum.”
Following this acquisition, GOZ’s portfolio value will have more than doubled over the last four years, from 24 properties valued at AU$662 million (ZAR5.9 billion) in June 2009, to 47 properties AU$1.73 billion (approximately ZAR15.6 billion). It also benefits from one of the longest WALE in the A-REIT sector at 6.8 years.
The acquisitions are in prime, established logistics locations and are being constructed to meet strong demand size brackets. They include the latest design features and specifications. With controlled lighting and rainwater harvesting, the buildings will incorporate a host of sustainable design features.
“This transaction supports continued distribution growth from GOZ,” says de Klerk, who notes GOZ is a strategic holding for Growthpoint. “GOZ’s forecast distribution for the 2014 financial year is the highest of its Australian peers at 3.8% and driven by portfolio income growth. Accretive acquisitions, which GOZ is actively pursuing, have the potential to drive this growth above guidance.”
The acquisitions use an efficient fund-through structure – with the upfront payment of land and deposits of AU$12,6 million followed by progress and completion payments – which reduces upfront costs and provides minimal development risks.
They will be partially funded by the take up of GOZ’s Distribution Reinvestment Plan for the distribution for the half-year ended 30 June 2013, in which Growthpoint is participating fully. GOZ also expects to use undrawn debt from its existing syndicated debt facility.