Quintessential wins big on Visy deal
Australian Financial Review | 11th January 2021 | Nick Lenaghan, Property Editor
Boutique property fund manager Quintessential Equity has struck its largest single industrial lease yet, with a 44,000-square-metre commitment from packaging giant Visy at an Adelaide facility it bought two years ago from Stockland.
Not only has the deal brought Visy into the Quintessential portfolio for the first time, it also takes the Port Adelaide Distribution Centre site to fully let, vindicating Quintessential’s $80 million purchase of the property in late 2019. The passing yield on purchase for the logistics hub was 12.4 per cent. The Visy leasing deal was brokered by Leedwell Property’s Steve Smith.
Port Adelaide Distribution Centre covers 33 hectares
Underlying Quintessential’s Adelaide investment is a longer-term view the fund manager and syndicator is taking on the prospect of disruption in the industrial market.
While industrial real estate has been one of the few runaway winners in the past year – riding a surge in demand from space from e-commerce retail – it should not be taken for granted as an asset-class free from risk, according to executive chairman Shane Quinn.
“I am bullish on industrial but – and it is a big ‘but’ – I think disruption is coming to that space, equally as much as to office and retail. What is an A-grade shed today won’t be an A-grade asset in 10 years time.
One obvious form of disruption for existing investment lies in the swing toward fully-automated, high-bay warehousing. The greater efficiencies gained in such industrial facilities will lead to more intensive land use, potentially undermining values of industrial assets overloaded with outmoded warehouses. Another potential disruptive force could be posed by the emergence of autonomous driving, although that risk may not emerge for some time.
“Our position is that industrial is a great sector to be in but don’t be blinded and think it’s a fortress style asset that can’t fail. So we are looking at more land-rich investments than improvement-rich investments,” Mr Quinn told The Australian Financial Review.
“When we pay for a site we really like to see the underlying land value – if it were to be vacant – to really underwrite the majority of our investment.”
While the existing 166,000sqm of space at the Adelaide facility is filled, the property has scope for two further proposed developments of 5000sq m and 7000sqm.
The Grindle Road industrial property bought by Quintessential for $18.5 million.
Meanwhile, at the other end of the country, Quintessential has acquired an industrial asset in Brisbane for $18.5 million. The property on Grindle Road in Rocklea will seed Quintessential’s $300 million blind fund, its Master Fund No. 2.
The fund raised over $145 million in equity within four weeks late last year, providing Quintessential with pre-committed capital to acquire and regenerate value-add and core-plus commercial office and industrial properties in CBD and city fringe markets.
The Rocklea site comprises eight warehouses with a gross lettable area of 20,407sqm. The deal, brokered by Colliers International’s Simon Beirne and Nicholas Evans, was struck on a 10.4 per cent passing yield, including a rental guarantee on vacancy.
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