Irongate announces acquisition of two properties and institutional placement

Graeme Katz, CEO of IAP
Graeme Katz, CEO of IAP.

Irongate Group (IAP) has announced its acquisition of an industrial park in Perth, Australia, the acquisition of an A-grade office building in Melbourne, and a fully underwritten institutional placement.

IAP has agreed to acquire the property known as ‘Bibra Lake’ for A$26 million, equating to an initial yield of 5.8% and a 50% interest in another property, Cremorne Property, for A$130 million, equating to an initial yield of 4.7%, The REIT also announced a fully underwritten institutional placement to raise approximately A$50 million at an issue price of A$1.55 per stapled security to partly fund the acquisition of the Cremorne Property.

The Bibra Lake asset is a newly built industrial business park comprising of 16 861m2 of lettable area across eight warehouses with 296 parking bays. Located 16 kms south of Perth’s CBD, it is close to key infrastructure including the Fremantle Port, Kewdale Freight Terminal, Perth Airport and the Roe and Kwinana Freeways.

We have been able to secure the property off-market at an acquisition yield that provides an attractive spread to the eastern seaboard states, where industrial assets are currently commanding yields of 4.00% – 4.75%. Recent transactions indicate that this spread will compress as investors shift their focus to the higher yields on offer in the Western Australian industrial market. The Bibra Lake Property is 100% leased with a 3.5-year WALE, with the tenants comprising prominent local businesses and larger national operators”, commented IAP CEO, Graeme Katz.

The Cremorne property is a brand-new A-grade office building comprising of 19 798m2 of lettable area across nine levels of office accommodation, ground floor retail, and 145 parking bays. It was designed to achieve a 5.0 Star NABERS Energy Rating, a 5-Star Green Star Design rating and it provides excellent tenant amenity with first-class end-of-trip facilities, state-of-the-art digital capabilities, and an exclusive rooftop terrace with a bar. It is located in Melbourne’s premier metro office market, 2kms south-east of the Melbourne CBD, and it enjoys excellent connectivity to the East Richmond train station and the Citylink Freeway.

The Cremorne Property provides us with an opportunity to improve the overall quality of the portfolio in a market we are familiar with. It was developed by Alfasi Group who will maintain a 50% interest in the property alongside IAP. The Cremorne Property has a current occupancy of 76% with a 7.5 year weighted average lease expiry and is anchored bymultinational Tokyo-listed marketing agency Dentsu Inc. (TYO:DNTUF), Monash IVF (ASX:MVF) and the Commonwealth Government’s National Disability Insurance Scheme, who together account for 59% of income. There is strong interest from high quality tenants to lease the vacant space, particularly given the quality of the Cremorne Property and its desirable location”, added Katz.

The funds raised under the placement will be used to partly fund the acquisition of the Cremorne property, with the remaining funding requirements for both properties being financed by a new tranche of debt under IAP’s existing debt facility.

Following completion of the acquisitions and the placement IAP’s gearing will be 34.3%, below the midpoint of the target range of 30% to 40%. IAP is also upgrading FY22 distribution per share growth to 2.5% to 3.0%, reflecting the top end of previously communicated guidance.

The acquisition of the Bibra Lake property is due for completion in February 2022 and the acquisition of the Cremorne property in mid-December 2021.