Charter Hall Social Infrastructure Limited is paying $103 million for an Adelaide fringe office under construction and majority leased to a state government essential services division.
The earthquake-resilient South Australian Emergency Services Command Centre on 1.6 hectares at 33 Richmond Road, Keswick, is earmarked for the ASX-listed Charter Hall Social Infrastructure REIT (CQE).
The purchaser will pay $23 million for the land and building work to date – in a deal expected to settle in November.
It will also invest $80m – the balance of the construction cost – to finish the facility by next October.
The outlay reflects a 4.8 per cent passing yield.
Charter Hall negotiated the off-market deal with the developer, Axiom Properties, with which it has a relationship.
The South Australian Emergency Services Command Centre
The state government’s lease covers 85 per cent the Richmond Rd property’s net lettable area.
The centre will include a 5532 sqm office adjoining a 1000 sqm warehouse adjacent to 1468 sqm of hardstand.
There is also a six storey car park which will service the CQE investment and the surrounding business park.
The asset includes backup power, water and wastewater storage and technology redundancies, the purchaser said.
The state government’s lease is for an initial 15 years with fixed 2.5 per cent annual rent rises (story continues below).
In 2036 it will be presented with the first of two five year renewal options.
Keswick is about two kilometres south west of the city.
Another new tenant for Charter Hall
CQE fund manager Travis Butcher said the Keswick asset adds an additional government occupier to its tenant composition “enhancing income sustainability and resilience with a continued focus on essential services”.
The hardstand has development upside “and the opportunity for other government related services to co-locate,” according to the executive.
“The absence of stamp duty in South Australia also improves the net return to CQE unitholders”.
Group managing director and chief executive officer David Harrison added “Adelaide is a market Charter Hall knows well with a long history of developing…most recently having completed the $251m…GPO Exchange”.
Last month, Charter Hall formed a relationship with not-for-profit medical giant Mater Misericordiae Limited, paying it $122.5m for an unbuilt office with a 10-year leaseback at Brisbane’s Newstead.
Following the completion of the South Australian and Queensland projects, CQE’s revenue from social infrastructure properties outside of childcare will increase to 15pc of portfolio income on a pro-forma basis.
It will also still have about $80m in liquidity to spend.