Charter Hall is paying Viridian Glass $100 million for a major industrial investment in Melbourne’s Dandenong South.
The sale and leaseback agreement was struck seven months after Viridian Glass listed its headquarters of more than six decades at 51-95 Greens Road.
Covering a 20 hectare industrial zoned plot, the 77,124 square metre facility is configured with multiple warehouses, offices, ancillary buildings and a cold store.
It is also designed with drive around truck access and multiple parking areas.
Viridian Glass offered the property with a lease expiring in 2028.
It agreed to pay a starting annual rent of $5.6 million (with annual 3 per cent increases) to lease it back.
On that basis, Charter Hall’s Prime Industrial Fund (CPIF) is acquiring the industrial investment on a 5.6 per cent passing yield.
About 4.1 hectares of the site could be developed without affecting the Viridian tenancy (in the initial marketing material, which included the image above, the building block component was promoted as 3.6 hectares).
JLL’s Tony Iuliano and Adrian Rowse represented Viridian Glass, a business which was acquired last year by private equity firm Crescent Capital Partners for $155 million.
The vendor of the business, CSR, earlier this year sold an 11.3 hectare Ingleburn factory also tenanted to Viridian Glass to Fife Capital for $66.3 million. This Sydney parcel included 2.2 hectares of surplus land which could be developed.
Charter Hall has spent some $5 billion on sale-and-leaseback investments since 2014
Charter Hall Industrial chief executive officer Richard Stacker said the transaction aligns with the company’s strategy of undertaking sale and leaseback transactions with major private corporates, as well as government entities.
Since 2014, Charter Hall has spent some $5 billion on sale-and-leaseback investments, including from Telstra, Woolworths, Bombardier Transport, Bunnings, Coca-Cola Amatil, Inghams an Peters Ice Cream.
CPIF fund manager Richard Mason said the Dandenong South transaction is consistent with CPIF’s strategy “to acquire core industrial and logistics properties close to major road and rail infrastructure” and which also provides CPIF “with a significant, well-located, high profile land bank for future development”.
Dandenong and Dandenong South are said to be Melbourne’s most valuable non-inner city industrial precincts in which to buy or rent.
“Industrial land holdings of this size within core infill metropolitan locations are becoming increasingly difficult to secure particularly within the Dandenong South industrial precinct which is currently seeing strong demand from industrial and logistics tenants,” Mr Mason added.
Following the acquisition of the Greens Road property, CPIF’s weighting to Sydney and Melbourne industrial markets increases to 64 per cent.
A development pipeline, described by the fund as substantial, will add to its exposure in these markets.
“CPIF continues to cement its position as one of Australia’s largest unlisted property funds focused on the industrial and logistics sector, with the recent $725 million equity raising giving the fund capacity to grow to in excess of $5 billion” Mr Mason said.
“The fund offers investors a high-quality portfolio with attractive five year forecast returns, underpinned by a substantial weighted average lease expiry (WALE) of 9.8 years, strong weighted average annual rental reviews of 3 per cent and resilient tenant covenants with 93 per cent leased to government, publicly listed or nationally/globally recognised tenants.
“CPIF has delivered annualised total returns of 10.1% over the three years to 30 September 2019, 11.2 per cent over five years and 10.7 per cent over 10 years, outperforming the MSCI Mercer Australian Core Property Fund Index which has delivered returns of 9.9 per cent, 10.6 per cent and 9.5 per cent respectively”.