Owner of The Grounds of Alexandria site sells off industrial parks

A fund run by heavyweight property group Dexus is capitalising on private players swooping on the hot logistics sector.

The Dexus Wholesale Australian Property Fund has sold industrial parks in Melbourne and Brisbane.

The property fund best known for owning the freehold of the high-profile Sydney restaurant The Grounds of Alexandria has sold off a series of industrial properties around the country at a premium.

The Dexus Wholesale Australian Property Fund, which last year bought the iconic property, The Mill – Alexandria, from its manager’s balance sheet for $186m, has sold industrial parks in Melbourne and Brisbane.

The fund said it had made “substantial progress” on its sales program, with demand still strong for industrial properties despite the commercial property slowdown.

In its biggest move, it sold the CentralWest Distribution Centre in Melbourne to KordaMentha’s funds arm, backed by PGIM Real Estate, ahead of expectations at $92m. It bought the property for $49m, and it was then valued at $57.5m, immediately prior to Covid-19.

The Laverton North facility, about 16km west of Melbourne’s CBD, has three modern warehouse facilities and land for potential future development.

Cushman & Wakefield’s Tony Iuliano, Chris Jones and Adrian Rowse and JLL’s Ben Hegerty, Joel Scully and Jack Kelliher handled the sale of the property at 13-19 William Angliss Drive in the tightly held infill precinct in Melbourne’s west.

Situated on a 12.1ha, buyers chased it due to the chance to activate the 1.62ha of development land. The warehouses are fully leased to Visy Glass Operations and Concept Logistics, with a weighted average lease expiry by income of 5.5 years. The net passing income of $4.54m is well below market levels, and the new owner could lift rents.

Steve Bulloch, managing director of PGIM Real Estate, said that Laverton North “presented an opportunity to acquire a large strategic holding with compelling future value in Melbourne’s west”.

Nick Crockett, partner, KM Property Funds, said that “PGIM Real Estate and the team are focused on delivering on the strategic value add initiatives planned for the asset”.

The fund also sold 704-744 Lorimer St in Port Melbourne for $61.5m – an 11 per cent premium to its December valuation – to a private group. The property is on a prime corner location in Port Melbourne, about 2km south west of the CBD. Port Melbourne is currently benefiting from planning changes and gentrification.

The 3.34ha landholding is one of the closest large sites to the Melbourne CBD zoned for industrial and commercial use and is close to the West Gate Freeway and CityLink interchanges. It spins off a fully leased net income of $3.2m, and the new owner has the chance to lift rents. The sale was handled by C&W’s Mr Iuliano, Mr Jones and Mr Rowse. The buyer is likely to land bank the site and lift its income, benefiting as space tightens up in the area’s employment precinct and from the shift towards mixed use projects in nearby areas, Mr Jones said.

The area’s transformation is expected to take off as the University of Melbourne moves to build a new campus in Fishermans Bend as part of a near $1bn commitment to create a world-class engineering and design innovation campus on part of the former General Motors Holden site.

The Dexus fund has also agreed terms to sell 121 Evans Rd, Sailsbury, in southern Brisbane ahead of book value via an off-market deal.

But the fund manager cautioned that commercial property values had softened substantially in the past 12 months, mainly due to rising interest rates and declining confidence in the office markets from global capital. It said there was a “modest” softening for industrial cap rates as evidence emerged that rental growth had peaked.

However, it said private investors were active, and five of the six properties that it had sold or were in due diligence going to experienced operators, who saw an opportunity to take advantage of the market rerating.

It said its own development program meant it would have added five brand-new buildings to its portfolio over the past 12 months and pushed into the mixed-use sector with the acquisition of The Mill.