Trilogy Funds, for the Industrial Property Trust (TIPT), has outlaid $16.14 million for an investment north west of Newcastle.
The 1.48 hectare Tomago block covering 12-14 Martin Street and, across the road, #13, was offered with a 10 year lease to Cougar Mining.
Based on the net passing rent, the purchase price reflects a 5.7 per cent yield.
The asset contains 7265 sqm across four buildings – three warehouses/workshops and an office.
The deal comes four months since we reported TIPT outlaid $20.6m for a 2.61ha industrial investment at Bells Creek, near Corbould Park, in the Sunshine Coast.
Precast Civil Industries occupies that asset.
In April, the fund spent $10.75m for a 4.92ha Torrington warehouse, west of Toowoomba, part-leased to RDO Equipment.
Trilogy Industrial Property Trust grows
TIPT now holds 15 assets worth $207.2m.
“Regional industrial properties may be favoured over inner-city areas, where tighter yields are more likely to soften in response to rising interest rates,” Trilogy managing director, Philip Ryan, said.
“The focus for the Trilogy Industrial Property Trust has been buying assets with good lease covenants with solid tenants in areas suited to logistics, warehousing, manufacturing and mining,” he added.
“As a result, we have concentrated on regional areas which are delivering significantly better returns for investors,” according to the executive.
“The trust maintains balanced exposure to both capital cities and regional cities, but we’ve been wary of paying too much for assets.
“The big issue is people overpaying for assets and we are seeing capitalisation rates softening, particularly in capital cities (story continues below).
“However, the industrial market is someone protected by strong supply-demand metrics, and the Industrial Trust’s portfolio is expected to continue to benefit from increasing valuation increases as its assets are progressively revalued”.
Mr Ryan said its warehouse tenants didn’t seek rent relief during COVID – unlike retail.
“Industrial property doesn’t have the same degree of incentives being paid like commercial office property [either],” according to the executive.
“We’ve also seen rent increases in line with inflation or a minimum amount,” he added of the sector.
“As an industrial property owner there is significant opportunity for us to cater to tenants’ specific requirements, enabling us to support our tenants’ business growth, retaining a high occupancy and strong Weighted Average Lease Expiry in our fund and deliver the best possible outcomes for the industrial trust.
“At our Carrum Downs property for example, we recently completed construction of a 550 sqm extension to the existing warehouse to support the tenant, Tempur Australia, with product expansion.
“This has contributed significantly to uplift in value of the property and resulted in the tenant extending their lease.
“Expansion potential was also an attractive factor for the recently acquired industrial asset at Corbould Park, where the asset is land rich, with approximately 19pc site coverage, presenting ample opportunity to increase the building’s floor area in the future.”
More warehouse investments are on the manager’s radar, Mr Ryan said.
“The Australian industrial property sector continues to be one of the most attractive property asset classes, supported by underlying fundamentals of robust demand and modest supply,” he added.
“While the right properties can be hard to find, we are continuing to actively look for quality investment properties that have tenants of good covenant with the option to value-add through expansion works if possible,” according to the executive.
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