CASE STUDY

LF Core Trust

James Melrose Road, Adelaide Airport

Origination

  • Institutional grade industrial asset acquired off-market on a ‘fund through’ basis.
  • Acquisition structure provided opportunity to de-risk development of brand new BlueScope Steel SA HQ and reduce transaction costs on acquisition.
  • Well-connected position within the Adelaide Airport Business District.
  • High quality industrial facility of 16,000sqm on 5 hectare land parcel.
  • Underpinned by a 12-year lease to ASX top 50 BlueScope Steel Limited (ASX:BSL).
  • Triple net lease with fixed 2.50% annual rental escalations.
  • Significant depreciation benefits from brand new building.

Strategy

  • Ownership of purpose-built industrial property with long-term stable income from high-quality tenant.
  • 7-10 year investment hold period offering ongoing rental escalation and opportunity to maximise returns through value appreciation.
  • Economic rent set at level below market providing opportunity for long term rental uplift at renewal.

Execution

  • De-risked delivery through development management agreement with external developer.
  • No construction or leasing risk for the Trust until completion of the building and commencement of the lease.
  • Construction funded by the Trust with development coupon on all monies advanced.

Result

  • Acquired for $25.58 million reflecting a net initial yield of 5.78%.
  • Independent valuation at acquisition was 5% above purchase price.
  • Current market rent assessed 43% above the commencement rent.
  • Most recent independent valuation of $27.5 million indicating value uplift of 7.5% above purchase price.