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 $29 million indicating value uplift of 7.5% above purchase price.